Philosophy Wire: Black-Scholes and the lack of Common Sense in economic (non)-“science”

Philosophy Wire by Spiros Kakos [2012-05-05]: The Black-Scholes formula was once thought to be a miracle in economic “science” [source: BBC News]. Everyone started using it. Humans stopped thinking and stopped using common sense. Everyone relied on computers who “decided” automatically on whether to buy or not options and futures, based on that mathematical equation. It all ended up in a catastrophe. It is characteristic that the year after Myron Scholes won the Nobel prize, his hedge fund crashed. Even the most mathematical of all “sciences”, too much use of mathematics can prove wrong…

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