First published 2013
James Weatherall traces how physicists transformed finance from fin-de-siècle Paris to modern Wall Street. He argues that the 2008 financial crisis stemmed not from mathematical modeling itself, but from sophisticated institutions failing to think like physicists about model limitations. Weatherall chronicles physicists who successfully tackled economic problems, traveling from wartime government labs to Yippie communes on the Pacific coast. He shows how these scientists approached options pricing and market bubbles differently than the mathematicians and software engineers whose abstractions failed in practice. The book reveals specific successes: a geophysicist who used earthquake prediction models to forecast a major stock market crash, and a physicist-run hedge fund that generated extraordinary returns during the 1990s. Weatherall also explores how quantum theory concepts might improve the Consumer Price Index. Rather than abandoning mathematical models after 2008, he advocates for better models built by people who understand their proper use and inherent limitations. The book offers readers insight into emerging approaches that could reshape financial thinking.
Genres: business, economics, non-fiction, finance, academic, history-of-science
Vibes: thought-provoking
Tropes: academic, interdisciplinary
Setting: Paris, Wall Street
Period: fin-de-siecle, modern
286 pages · Hardcover · Mariner Books