Econometricians, Financial Markets and Uncertainty: An Anthropological View

review essay on David Graeber on the “paradox of performativity”

Fixing the Economists

manaI recently read a paper by the anthropologist David Graeber entitled ‘The Sword, The Sponge, and the Paradox of Performativity: Some Observations on Fate, Luck, Financial Chicanery, and the Limits of Human Knowledge‘. Graeber sent it to me because we are hoping to write an article on the emergence of probability theory and its application in the financial markets.

The working title of our paper is ‘The Betrayal of Freedom and the Rise of the Future Machines’. The basic idea is to show that the predictive powers of social sciences — including economics and finance — were shown to be fairly vacuous in the 1960s from a variety of different directions. The response by the horrified professions was to bury the evidence and double down on probabilistic prediction. This coincided with the rise of finance and the whole thing produced the weird world of meaningless numbers and extreme…

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