An Engine Not A Camera – Chapter 1 – Performing Theory?


The book concerns two interconnected stories that MacKenzie illustrates with an example from the October 1987 stock market crash. First the growth of markets that exchange not stocks but ‘derivatives’. As we all know, the percentage of our economy build on such derivatives is huge – MacKenzie quotes the market being worth $273 trillion. Second the “emergence of modern theories of financial markets” rendered in elegant mathematics that had begun in the 1950s, and become significant in the 1960s and 70s. MacKenzie details the snobbery directed towards such models by economics departments and as a result such theories were largely developed in business schools. The book is about the relationship between these two stories – “What were the effects on financial markets of the emergence of an authoritative theory of those markets?”.

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