

Physics Envy Can Kill You - cwan
http://paul.kedrosky.com/archives/2010/06/physics_envy_ca.html

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phreeza
This is a 1h video, with no summary. Abstract taken from
<http://web.mit.edu/alo/www/Papers/physics.html>

The quantitative aspirations of economists and financial analysts have for
many years been based on the belief that it should be possible to build models
of economic systems—and financial markets in particular—that are as predictive
as those in physics. While this perspective has led to a number of important
breakthroughs in economics, "physics envy" has also created a false sense of
mathematical precision in some cases. We speculate on the origins of physics
envy, and then describe an alternate perspective of economic behavior based on
a new taxonomy of uncertainty. We illustrate the relevance of this taxonomy
with two concrete examples: the classical harmonic oscillator with some new
twists that make physics look more like economics, and a quantitative equity
market-neutral strategy. We conclude by offering a new interpretation of tail
events, proposing an "uncertainty checklist" with which our taxonomy can be
implemented, and considering the role that quants played in the current
financial crisis.

