An Engine, Not a Camera: How Financial Models Shape Markets

An Engine, Not a Camera: How Financial Models Shape Markets

by Donald Mackenzie
     
 

In An Engine, Not a Camera, Donald MacKenzie argues that the emergence of modern economic theories of finance affected financial markets in fundamental ways. These new, Nobel Prize-winning theories, based on elegant mathematical models of markets, were not simply external analyses but intrinsic parts of economic processes.

Paraphrasing Milton Friedman,

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Overview

In An Engine, Not a Camera, Donald MacKenzie argues that the emergence of modern economic theories of finance affected financial markets in fundamental ways. These new, Nobel Prize-winning theories, based on elegant mathematical models of markets, were not simply external analyses but intrinsic parts of economic processes.

Paraphrasing Milton Friedman,
MacKenzie says that economic models are an engine of inquiry rather than a camera to reproduce empirical facts. More than that, the emergence of an authoritative theory of financial markets altered those markets fundamentally. For example, in 1970,
there was almost no trading in financial derivatives such as "futures." By June of
2004, derivatives contracts totaling $273 trillion were outstanding worldwide.
MacKenzie suggests that this growth could never have happened without the development of theories that gave derivatives legitimacy and explained their complexities.

MacKenzie examines the role played by finance theory in the two most serious crises to hit the world's financial markets in recent years:
the stock market crash of 1987 and the market turmoil that engulfed the hedge fund
Long-Term Capital Management in 1998. He also looks at finance theory that is somewhat beyond the mainstream -- chaos theorist Benoit Mandelbrot's model of "wild"
randomness. MacKenzie's pioneering work in the social studies of finance will interest anyone who wants to understand how America's financial markets have grown into their current form.

The MIT Press

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Product Details

ISBN-13:
9780262633673
Publisher:
MIT Press
Publication date:
09/30/2008
Series:
Inside Technology
Edition description:
New Edition
Pages:
392
Sales rank:
1,470,296
Product dimensions:
5.90(w) x 8.80(h) x 0.90(d)
Age Range:
18 Years

Table of Contents

Preface
Acknowledgments
The Names "ASCC" and "Mark I"
1Introduction to a Pioneer1
2Early Life and Education9
3A Harvard Graduate Student21
4First Steps Toward a New Type of Calculating Machine33
5An Unsuccessful Attempt to Get the Machine Built39
6Seeking Support from IBM45
7The Proposal for an Automatic Calculating Machine53
8Aiken's Background in Computing and Knowledge of Babbage's Machines61
9Planning and Beginning the Construction of the Machine73
10How to Perform Multiplication and Division by Machine87
11Construction of the Machine95
12Installing the ASCC/Mark I in Cambridge and Transferring It to the Navy109
13Aiken at the Naval Mine Warfare School115
14The Dedication121
15The Aftermath131
16Some Features of Mark I147
17Programming and Staffing, Wartime Operation, and the Implosion Computations159
18The Mystery of the Number 23169
19Tables of Bessel Functions177
20Aiken's Harvard Program in Computer Science185
21Later Relations between Aiken and IBM197
22Aiken at Harvard, 1945-1961201
23Life in the Comp Lab215
24Retirement from Harvard227
25Businessman and Consultant231
26A Summing Up237
App. AThe Harvard News Release249
App. BAiken's Talk at the Dedication253
App. CAiken's Memorandum Describing the Harvard Computation Laboratory263
App. DThe Stored Program and the Binary Number System269
App. EAiken's Three Later Machines275
App. FHow Many Computers Are Needed?283
App. GThe NSF Computer Tree295
App. HWho Invented the Computer? Was Mark I a Computer?297
App. IThe Harvard Computation Laboratory during the 1950s305
Sources309
Index325

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