Must Read Books

An Engine, Not a Camera-How Financial Models Shape Markets by Donald MacKenzie

Here's review by Warsh;

"MacKenzie's title derives from a famous phrase of Milton Friedman's -- economic theory as an engine intended to analyze the world, not a camera expected to faithfully reproduce its fine-grained facts. But MacKenzie has subtly altered the meaning of the phrase, in order to tell the story of the rise of financial economics in the 1960s and '70s. The engine, he says, has begun actively transforming the environment. Its analysis has become operational.

This is familiar territory to readers of Peter Bernstein's 1992 chronicle of the development of financial theory, Capital Ideas: The Improbable Origins of Modern Wall Street. That famous first draft of history stands up very well indeed. MacKenzie emphasizes the debt that he and all future historians of financial markets will owe to Bernstein, a successful money manager who sought to convey the vast changes taking place around him. Still, we are nearly fifteen years on from that volume. What's become clear that wasn't clear then? What has been settled? What is still up in the air?

For MacKenzie, a professor of sociology at the University of Edinburgh, a good deal remains unsettled. A longstanding interest in patterns of technological development has convinced him that technology is far from being governed strictly by its internal logic. In Inventing Accuracy: A Historical Sociology of Nuclear Missile Guidance (1990), he traced the political and military pressures that gave rise to a series of weapons systems thought to be capable of ever-increasing precision. In Mechanizing Proof: Computing, Risk, and Trust (2001), he delineated two ideals of proof -- the classical version of the geometers and mathematicians, and the new statistical variety of those who predict the behavior of elaborate computer-basted technologies, such as power grids, weapon systems and the global banking regime."