My guest today is Donald MacKenzie, a Professor of Sociology at the University of Edinburgh, Scotland. He works on the sociology of markets, focusing on automated trading, the use of mathematical models, and the evaluation and trading of bonds. MacKenzie has worked in the past on topics ranging from the sociology of nuclear weapons to the meaning of proof in the context of computer systems critical to safety or security.
The topic is his book An Engine, Not A Camera: How Financial Models Shape Markets.
In this episode of Trend Following Radio we discuss:
- Economic models
- Self-fulfilling prophecies and economics
- Our beliefs and the social world
- The definition of performativity
- Mackenzie’s analysis and study of the Black-Scholes model
- Long Term Capital Management
- The intellectual gap between purveyors of the efficient market hypothesis vs. behavioral economists as reflected in the 2014 Nobel Prize winners
- The arms race in high frequency trading.
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