Against the Gods: the Remarkable Story of Risk
Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein explains that the modern world was created by the mathematics of chance. Earlier times had traders, bankers and merchants. Our capitalist culture is special because of the mathematics of risk invented by Fermat and Pascal. Those tools within the Renaissance cultural context allowed the idea that we could - and should - discover and control the future.
“The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature.” (pg 1 ppb)
“Up until the Renaissance, people perceived the future as little more than a matter of luck or the result of random variations and most of their decisions were driven by instinct. When the conditions of life are so closely linked to nature, not much is left to human control. As long as the demands of survival limit people to the basic functions of bearing children, growing crops, hunting, fishing, and providing shelter, they are simply unable to conceive of circumstances in which they might be able to influence the outcomes of their decisions. A penny saved is not a penny earned unless the future is something more than a black hole.” (pg. 18)
From there, Bernstein covers the expected territory of probability theory and statistics: Pascal, Fermat, Graunt, Galton... Allusions and examples from the American stock markets abound. While an impassioned capitalist, he is not perfectly consistent in an Objectivist sense, admitting to the need for some government regulation of the financial markets. However, lowercase-o objectivism runs throughout this work, as it must in any exploration that supports facts with theories and hypotheses with evidence.
Also many here will find it curious that John Maynard Keynes could be quoted as an objectivist: “When once the facts are given which determine our knowledge, what is probable or improbable in these circumstances has been fixed objectively and is independent of our opinion.” (A Treatise on Probability, 1921; cited pg 226.)
Peter Lewyn Bernstein (January 22, 1919 – June 5, 2009) shared his passion for markets with Robert Heilbroner (The Worldly Philosophers) with whom he attended both primary and secondary school, as well as Harvard College. (Biography on Wikipedia.)
Bernstein is also associated with the efficient market hypothesis which “asserts that one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made. (Wikipedia here.) Bernstein was the first editor of _The Journal of Portfolio Management_. He authored several books including _Capital Ideas: The Improbable Origin of Modern Wall Street_. Bernstein published five of his ten books after he was 75 years of age.
“The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature.” (pg 1 ppb)
“Up until the Renaissance, people perceived the future as little more than a matter of luck or the result of random variations and most of their decisions were driven by instinct. When the conditions of life are so closely linked to nature, not much is left to human control. As long as the demands of survival limit people to the basic functions of bearing children, growing crops, hunting, fishing, and providing shelter, they are simply unable to conceive of circumstances in which they might be able to influence the outcomes of their decisions. A penny saved is not a penny earned unless the future is something more than a black hole.” (pg. 18)
From there, Bernstein covers the expected territory of probability theory and statistics: Pascal, Fermat, Graunt, Galton... Allusions and examples from the American stock markets abound. While an impassioned capitalist, he is not perfectly consistent in an Objectivist sense, admitting to the need for some government regulation of the financial markets. However, lowercase-o objectivism runs throughout this work, as it must in any exploration that supports facts with theories and hypotheses with evidence.
Also many here will find it curious that John Maynard Keynes could be quoted as an objectivist: “When once the facts are given which determine our knowledge, what is probable or improbable in these circumstances has been fixed objectively and is independent of our opinion.” (A Treatise on Probability, 1921; cited pg 226.)
Peter Lewyn Bernstein (January 22, 1919 – June 5, 2009) shared his passion for markets with Robert Heilbroner (The Worldly Philosophers) with whom he attended both primary and secondary school, as well as Harvard College. (Biography on Wikipedia.)
Bernstein is also associated with the efficient market hypothesis which “asserts that one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made. (Wikipedia here.) Bernstein was the first editor of _The Journal of Portfolio Management_. He authored several books including _Capital Ideas: The Improbable Origin of Modern Wall Street_. Bernstein published five of his ten books after he was 75 years of age.
efficient market is a derivative of perfect competition, in my opinion, which has been used to justify all sorts of "meddling" in the market and justifying anti-trust laws due to so-called market "failures."
No doubt finance and probability have been key in creating our modern world. However, there is this tendency in our culture to push the idea that capitalism IS finance. and that the financiers are the creative drivers in our world. Finance does two things. 1. reduces transaction costs 2. allocates capital to productive/creative projects. There have been great innovations in finance, for example fraction-reserve banking, exchange banks, etc. But what drives an economy forward primarily is increasing our levels of technology.