Volume 32, Issue 1, Spring 2018
What’s Wrong With Ponzi Schemes? Trust and Its Exploitation in Financial Investment
The role of trust in financial investment has been a matter of some contention, one often obscured by two misconceptions: (1) that financial relationships are fit only for wary predictive reliance where trust has no rational basis, and (2) that in those relationships where trust is operative it must be worth preserving. Following Baier’s contention that trust, like air, is more easily seen when polluted, here I consider Ponzi schemes as exemplars of corrupt and polluted trust. Without attending to the role of trust in financial relationships, I argue, we can not make sense of how Ponzi schemes work, why investors are fooled, what it is that makes Ponzi schemes distinctively wrong, and what differentiates them from structurally similar yet legitimate financial practices.