Physicists don’t love economists, and other revelations

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My speech Friday to the assembled geniuses at the Hertz Foundation Symposium in Santa Clara went okay, I think. It was my first-ever PowerPoint presentation, and there was a fraught moment beforehand where my laptop and the projector simply would not—despite the efforts of several first-rate physicists and mathematicians who sprang to my aid—communicate. But then another laptop was brought in and it all worked. I felt like my talk, a short-hand version of The Myth of the Rational Market, rambled and went on for too long—the $100 I spent at Cartoonbank notwithstanding. But as soon as I stopped, everybody wanted to ask questions, make comments, etc. We could have gone on for hours. (You can see a little bit of the Q&A here.)

The hard-science types who populated the conference (the Hertz Foundation gives fellowships to “exceptionally talented individuals studying in the applied physical, biological and engineering sciences”) turned out to be extremely dubious of the claims of academic economics and finance. This wasn’t really that big a surprise, but I was still a little taken aback at the heat with which some of the Hertzians dissed the economists. I eventually fell back on the standard defense: economics is harder than physics. According to one guy in the audience, Max Planck once said the same thing. So it must be true.

Another interesting subtext was that a big minority of the Hertz fellowship recipients have worked in quantitative finance (of the 20-odd people I spoke with, three were current or former employees of D.E. Shaw & Co.), while another big minority are furious at how many talented people have been sucked out of physics, mathematics, and the like into finance. But maybe that’s about to change.

Full disclosure: I didn’t get a speaking fee, but the Hertz Foundation did pay my way (or at least will if I ever get around to sending in an expense report).