PrestoPundit

“BLAME THE COMPUTERS”

Posted by PrestoPundit on 09/18/2008

the latest scapegoat for the financial meltdown.  Actually, that’s a bit misleading.  What the math jocks who promote computer modeled “risk” are claiming is that Wall Street firms have failed to use their computers correctly, supposedly for financial reasons.  But the dirty secret of the “quants” is that none of them genuinely grapples with the real nature of risk or the true reality of the market process. In fact, if truth be told, the computer programs of the “rocket scientists” are inherently “fragile”, they can’t in fact internalize the full and messy world of risk and change in which financial judgments and market processes take place.

So your take away lesson is this.  Don’t blame the computers or the firms which use them, blame the economists who falsely told us that these models were “scientific”, indeed “scientific” models of reality.  When in fact they were known by science to be flawed and incomplete tools.

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