Fischer Black

In these essays, Fischer Black reaches provocative conclusions concerning the role of equilibrium in a developed economy.

Black, who published this volume while a Goldman Sachs partner, was attracted to the study of economics and finance by the concept of equilibrium. His studies lead to essays on central banking, monetary policy and foreign banking. His conclusion: there is little a central banker can do to effect conditions. These are surprising conclusions from someone who spent time on the faculty at the University of Chicago with Milton Friedman.

To me, the most interesting essays deal with the role of noise. Black argues that speculative prices contain “noise,” created by those who trade on mistaken perceptions. He concludes that the prices of goods and services also contain noise introduced by the investment decisions of those acting irrationally. This results in wider fluctuations than might otherwise result.

Although widely viewed as a quant, Fischer’s essays are largely verbal. He says he believes mathematical models limit the creative process, locking the modelers into specific lines of thought. Fischer’s surprising conclusions support his verbal reliance.

Whether he is right or wrong, his work is always stimulating.

Penned by the Pointed Pundit
September 6, 2007
12:56:17 PM… (mehr)