The Physics of Wall Street: a brief History of Predicting the Unpredictable

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of physics, or that physics and mathematics can be applied to clearly 
numerical areas of economics like finance, but not to other areas. In-
stead, it’s that physicists have successfully applied a way of thinking 
about the world to some areas of economics, and one should fully ex-
pect that those methods should be helpful in other areas, too. Indeed, 
they already are helpful in other areas of economics, insofar as econo-
mists already use mathematical models for all sorts of things that have 
nothing to do with finance. Weinstein and Malaney’s ideas underline 
the fact that mathematical tools are used in every area of economic 
thought, including things like policymaking — as shown by the disas-
trous Boskin commission.
from this point of view, Weinstein and Malaney’s proposal is just 
a recognition that there are ways to make those models better, to use 
more powerful mathematics to avoid having to make strong assump-
tions about people and markets. It may turn out that gauge-theoretic 
methods are a dead end. But there’s no reason to rule them out in ad-
vance of careful study. After all, gauge theory was useful in physics 
when it became clear that a new generation of theories was necessary. 
one might as well see if it can do the same thing for economics. Wein-
stein, Malaney, and Smolin have shown that this might be possible.
the idea that methods from physics can be useful in economics is 
an important one. equally important is that Weinstein and Malaney’s 
ideas were never given a fair hearing by economists or policymakers. 
there is something deeply troubling about the suggestion that soci-
ological and financial forces have suppressed an important new dis-
covery that could change how we understand something as crucial to 
the economy as inflation. With this in mind, Weinstein’s Manhattan 
Project should not be taken as a call for new tools for investors. no 
one thinks we should devote public resources to the search for a new 
options model that would help a handful of companies profit. Instead, 
the proposal was intended to bring mainstream economics up to speed 
with modern physics and mathematics, setting aside the powerful po-
litical and financial forces that distort the discipline.
In a 1965 Supreme court decision on freedom of speech, Justice Wil-
liam Brennan coined the expression “marketplace of ideas” to describe 
how the most important insights might be expected to arise out of a 

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free and transparent public discourse. If this is right, then you would 
expect that the best new ideas about economics would get taken up —
even if powerful economists rejected them. this should be particularly 
true for ideas in finance, since a good idea there can lead to large prof-
its. In this regard, it is interesting that most of the physicists described 
in the last three chapters of the book, notably farmer, Packard, and 
Weinstein, took their ideas to the financial markets when they were 
rejected by economists. that the ideas have been profitable should be 
a sign of their importance — and yet, many economists have refused 
to take notice, including those who set government policy. If there is, 
as Brennan suggests, a marketplace of ideas, it is deeply inefficient, to 
the detriment of the rest of us. Smolin moved on to other projects once 
he realized that mainstream economists weren’t interested in hearing 
what he had to say. even Sornette, who has worked tirelessly to present 
his ideas in a way that mainstream economists could understand and 
appreciate, has hardly been embraced by that community. Much of his 
audience consists of practitioners.
I don’t know how to change the sociology of economics depart-
ments. But I think that Weinstein’s idea of a major interdisciplinary 
research initiative would be an excellent start — provided there was 
some strong institutional or government support behind it, to hold the 
community together and keep it on track. After all, the original Man-
hattan Project was a military affair, and it revolutionized physics by 
changing the way physicists thought about their discipline. A similar 
commitment on the part of the government or a major not-for-profit 
in the service of a new generation of economic models would surely 
have similar effects. More importantly, it would be a source of sorely 
needed new insights. After years of recession and lackluster growth, it’s 
time to get creative.
When Weinstein first proposed a new Manhattan Project to better un-
derstand economics, he was quickly drowned out by the same voices 
that were criticizing mathematical models and the role of physicists 
in finance more generally. Indeed, in the years since the 2008 mar-
ket crash, we’ve heard a steady drumbeat of criticism of the role of 
physicists in finance and economics. Words like quant, derivative, and 

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model have taken on some nasty connotations. now that I have laid out 
the history of these ideas, the naysayers merit some further thought. 
It seems to me that if you think about mathematical modeling in the 
right way, these criticisms are wrong-headed. Understanding why is