An Engine, Not a Camera: How Financial Models Shape Markets / Edition 1

An Engine, Not a Camera: How Financial Models Shape Markets / Edition 1

by Donald Mackenzie
     
 

ISBN-10: 0262134608

ISBN-13: 9780262134606

Pub. Date: 05/01/2006

Publisher: MIT Press

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,

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.

Product Details

ISBN-13:
9780262134606
Publisher:
MIT Press
Publication date:
05/01/2006
Series:
Inside Technology
Edition description:
New Edition
Pages:
392
Product dimensions:
6.00(w) x 9.00(h) x 0.81(d)
Age Range:
18 Years

Customer Reviews

Average Review:

Write a Review

and post it to your social network

     

Most Helpful Customer Reviews

See all customer reviews >