Comments on: Are Scientists to Blame for the Financial Crisis? http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/ A blog about science, politics, and how to let each help the other without compromising them both. Thu, 08 Jan 2009 09:37:14 +0000 http://wordpress.org/?v=2.3.1 By: nickgogerty http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4134 nickgogerty Wed, 26 Nov 2008 22:18:05 +0000 http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4134 Myron Scholes has blown up 2 hedge funds personally and the Mean Variance assumption baked into most risk models is doing a heck of a job on the rest of the financial infrastructure. It is a paradigm problem Markets are a social paradigm not a physical one. There is no falsifiability in risk and yet we use models that impute it. The only thing worse than no risk tools is relying on flawed risk tools. http://nickgogerty.typepad.com/designing_better_futures/2008/11/value-risk-and-frogger.html Myron Scholes has blown up 2 hedge funds personally and the Mean Variance assumption baked into most risk models is doing a heck of a job on the rest of the financial infrastructure. It is a paradigm problem Markets are a social paradigm not a physical one. There is no falsifiability in risk and yet we use models that impute it. The only thing worse than no risk tools is relying on flawed risk tools. http://nickgogerty.typepad.com/designing_better_futures/2008/11/value-risk-and-frogger.html

]]> By: Not Science, Greed « Simple Country Physicist http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4109 Not Science, Greed « Simple Country Physicist Tue, 25 Nov 2008 12:39:59 +0000 http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4109 [...] , Simple Country Physics , Southern Fried Cynicism I notice in Discovery an article [Link] laying partial blame for the Wall Street debacle to the “quants”, people educated as [...] […] , Simple Country Physics , Southern Fried Cynicism I notice in Discovery an article [Link] laying partial blame for the Wall Street debacle to the “quants”, people educated as […]

]]> By: Amos Kenigsberg http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4095 Amos Kenigsberg Mon, 24 Nov 2008 18:04:37 +0000 http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4095 Interesting idea, Ian, but I think that it was (and is) generally the quants themselves who write and use their own models. Technology Review was a little ahead of the game when they pointed out <a href="http://www.technologyreview.com/printer_friendly_article.aspx?id=19530" target=_blank rel="nofollow">the quants' systematic error</a> in a piece at the end of last year -- good stuff. Interesting idea, Ian, but I think that it was (and is) generally the quants themselves who write and use their own models.

Technology Review was a little ahead of the game when they pointed out the quants’ systematic error in a piece at the end of last year — good stuff.

]]> By: Ian O'Neill http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4094 Ian O'Neill Mon, 24 Nov 2008 17:55:54 +0000 http://blogs.discovermagazine.com/realitybase/2008/11/24/are-scientists-to-blame-for-the-financial-crisis/#comment-4094 Or perhaps use physicists and mathematicians in Wall St... I'm pretty sure this whole mess may have been avoided (if not predicted years in advance) if the guys who wrote the models were using them on the ground... After all, a car is only as good as its driver--it could be the most advanced risk model in the world, but if the results from the model are interpreted by a non-specialist, the model is only as good as the user. I'm surprised SciAm would take this stance to be honest. Thanks for the insight! Cheers, Ian Or perhaps use physicists and mathematicians in Wall St… I’m pretty sure this whole mess may have been avoided (if not predicted years in advance) if the guys who wrote the models were using them on the ground…

After all, a car is only as good as its driver–it could be the most advanced risk model in the world, but if the results from the model are interpreted by a non-specialist, the model is only as good as the user.

I’m surprised SciAm would take this stance to be honest.

Thanks for the insight!

Cheers, Ian

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