The Physics of Finance

Predicting the Unpredictable: Can Science Beat the Market?

by James Owen Weatherall

  • Published: 07 Feb 2013
  • Price: £12.99
  • Extent: 288p
  • ISBN: 978-1-78072-139-2

After the economic meltdown of 2008, many pundits placed the blame on ‘complex financial instruments’ like derivatives, and the physicists and
mathematicians who dreamed them up. But a young academic named James Owen Weatherall quickly began to question this narrative. Were the physicists really at fault?

In this important and engaging book, Weatherall tells the story of how physicists came to Wall Street and how their ideas changed finance forever. Taking us from fin-de-siecle Paris to Rat Pack-era Las Vegas, from wartime government labs to Yippie communes, he shows how physicists successfully brought their science to bear on some of the thorniest problems in economics, from options pricing to bubbles. The trouble is that models – whether in science or finance – have limitations; they break down under certain conditions. And in 2008, sophisticated models fell into the hands of people who didn’t understand their purpose, and didn’t care. It was a catastrophic misuse of science. The solution, as Weatherall argues, is not to give up on models; it is simply to make them better.

“‘Even laymen can enjoy Weatherall’s sketches of eccentric theoreticians... He adeptly simplifies information for the uninitiated.’ - Publishers Weekly”

About James Owen Weatherall

James Owen Weatherall is a physicist, philosopher and mathematician. He holds graduate degrees from Harvard, the Stevens Institute of  Technology, and the University of California, Irvine, where he is presently an assistant professor of logic and philosophy of science. He has written for Slate and Scientific American.