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Maths and morals, economics and greed

Thu, 04 Dec 2014 10:05:17 GMT

This piece has been posted on the Res Publica think tank Disraeli Room blog. I recently asked a prominent mathematician who once ran a hedge fund, Doyne Farmer, whether seeking to make a riskless profit was ethical. I don't think he understood the question. Mathematics has always been part of finance but with the re-introduction of derivatives markets in the 1970s and their growth in the nineties, ‘quants’, trained in engineering, physics and mathematics, came to dominate the ‘casino banking’ that is widely criticised. My concern is that the quants are not amenable to questions of morality, and so the problems of finance are going to be difficult to resolve without finding the right way of communicating with the bankers who see themselves as scientists. I am a mathematician who works on financial problems who became interested in the role of mathematics in the financial crises since 2006. Initially my focus was on explaining why mathematics is so critical to modern banking in...

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