Such pragmatism is needed in financial theory. It is the Hippocratic Oath to “do no harm.” In finance, I believe the conventional models and their more recent “fixes” violate that oath. They are not merely wrong; they are dangerously wrong. They are like a shipbuilder who assumes that gales are rare and hurricanes myth; so he builds his vessel for speed, capacity, and comfort—giving little thought to stability and strength. To launch such a ship across the ocean in typhoon season is to do serious harm. Like the weather, markets are turbulent. We must learn to recognize that, and better cope.
