Every Revolution Needs To Anticipate Its Own Counterrevolution
In 1954 the economist Paul Samuelson received a postcard about an obscure dissertation. Written in 1900 by a long forgotten mathematician named Louis Bachelier, it implied that market behavior could be predicted using statistical techniques. Based on that foundation, Samuelson pioneered a new era of financial engineering.
As the eminent sociologist Max Weber pointed out, while material interests govern people’s conduct, ideas act like switchmen, determining the tracks that we travel down. Samuelson’s discovery of Bachelier’s paper was a moment when the track was switched. If markets could be engineered, the thinking went, they could be trusted.
We need to be careful about the stories we accept. Once the switchman changes those tracks, a zeitgeist forms and the wheels of society turn to keep the train going. We begin to judge progress on how far and fast we can get the train to go, rarely questioning whether we are on the right track or how we got started in that direction. Inevitably, we miss the backlash.
The Engineering Mindset
Samuelson’s discovery of Bachelier’s paper revolutionized economics. If economic behavior could be mathematically predicted, then systems could be built to drive decision making. Rather than rely on human judgment or…
