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

= mc
2
.
13 “. . . curve known as a normal distribution . . .”: for more on probability distri-
butions, and the normal distribution in particular, see casella and Berger (2002), Bill-
ingsley (1995), and forbes et al. (2011).
15 “. . . Bachelier was essentially unprecedented in conceiving . . .”: for both so-
phistication and (ultimately) influence, Bachelier is without peer. But in fact, there were 
some others who either anticipated Bachelier in some ways (most notably Jules reg-
nault) or else did similar work within a few years of Bachelier (for instance, vinzenz 
Bronzin). for more on these other pioneers in finance, see Poitras (2006) (especially 
Jovanovic [2006] and Zimmermann and Hafner [2006]) and Girlich (2002).
16 “The efficient market hypothesis was later rediscovered . . .”: See fama (1965). 
the efficient market hypothesis is now a central part of modern economic thought; it 
is described in detail in any major textbook, such as Mankiw (2012) or Krugman and 
Wells (2009). for a history of the efficient market hypothesis, see Sewell (2011) and Lim 
(2006). See also the dozens of recent books and articles attacking the idea that markets 
are in fact efficient, such as taleb (2004, 2007a), fox (2009), cassidy (2010a,b), Stiglitz 
(2010), and Krugman (2009).
17 “. . . called the random character of Stock Market Prices”: this is cootner 
(1964).
18 “In Cootner’s words . . .”: the quote is from cootner (1964, p. 3).
18
“. . . mathematical physicist and statistician named E. B. Wilson”: Wilson was 
a polymath who made major contributions to many fields, including statistics, physics, 
engineering, economics, and public health. In some ways, however, his most lasting 
contributions were pedagogical; his textbooks on vector analysis (Wilson 1901) and ad-
vanced calculus (Wilson 1912) became the standards for a generation of American scien-
tists and engineers. details about his intellectual biography are to be found in Hunsaker 
and Lane (1973).
18
“Gibbs is most famous for . . .”: for more on Gibbs and his work, see Hastings 
(1909), rukseyer (1988), or Wheeler (1988). His student e. B. Wilson, noted above, also 
wrote a memoir of his interactions with Gibbs (Wilson 1931).
19 “. . . called foundations of economic Analysis”: this is Samuelson (1947). 
Samuelson’s textbook on economics (Samuelson 1948) further extended his influence on 
American economic thought.

---

Notes 
•
233
19
“. . . economics matured as a science”: the picture of the history and especially 
the mathematization of economics presented here is heavily indebted to Morgan (2003).
19
“. . . in part because of the work of Irving Fisher . . .”: for more on the life and 
work of Irving fisher, see Allen (1993).
20 “. . . physicist turned economist, Jan Tinbergen”: the claim about the origin 
of the term model comes from Morgan (2003). for a brief biographical sketch of tin-
bergen, see Hendry and Morgan (1996); for a more detailed discussion of his work, see 
Morgan (1990).
20
“Unlike in physics . . .”: the relationship between models and theories, and in 
particular how models in economics differ from theories in physics, is the topic of der-
man (2011b).
23 “He circulated a letter . . .”: the letter is reprinted in courtault and Kabanov 
(2002).
23
“ . . . Lévy read Bachelier’s final paper”: the paper would have been Bachelier 
(1941). the version of the story I tell here comes from taqqu (2001). It is based on con-
temporaneous notes on Lévy’s copy of Bachelier (1941). Lévy himself, in a much later 
letter to Benoît Mandelbrot, recalls a slightly different story, in which he encountered a 
reference to Bachelier in Kolmogorov (1931) in 1931 and immediately returned to Bach-
elier’s work. the existence of the 1941 paper, however, with Lévy’s annotations concern-
ing a recent reconciliation, suggest that Lévy misremembered. for more on Lévy, see the 
biographical note in Mandelbrot (1982).
2. swimming Upstream
25 “Maury Osborne’s mother . . .”: Almost nothing has been written about M.f.M. 
osborne, though his contributions to the early study of market randomness are widely 
recognized. He is mentioned briefly in Bernstein (1993). the biographical material in 
this chapter comes from numerous interviews with two of his children, Holly osborne 
and Peter osborne; an interview with one of his principal collaborators, Joe Murphy; 
and especially from documents provided to me by his family. Included among these 
documents were two autobiographies that he composed for his family in 1987 (osborne 
1987a, b). Holly, Peter, and their sister, Melita osborne carter, were generous enough to 
read an earlier draft of this chapter and check it for accuracy.
25