A model with fewer free parameters is easier for practitioners to adopt.

Evidence

The Black-Scholes-Merton model’s one free parameter (volatility) was easily grasped, discussed, and reasoned about. Other models including some of the variants of and modifications of Black-Scholes-Merton that were offered by other financial economists typically involved a mental grasp of, and estimation of, more than one free parameter often three or more. As The Stock Options Manual put it, “the user of these complex models is called upon to deal with more unknowns than the average human mind can handle” (Gastineau 1979, p. — Donald MacKenzie, An Engine, Not a Camera, 726

Categorization

• XREF: This connects to the broader performativity literature on why some models propagate while others fail — a variable the reader, building an intermediate understanding of financialization, will want to track across the whole book. — connects to: Applying economic models requires tacit professional judgment, not fixed rules.; Economic models are deliberately simplified representations enabling mathematical reasoning. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 40
• QUESTION: Worth asking later: does the same logic (fewer parameters beats accuracy) explain the success of other market models — e.g. CAPM vs. multi-factor models?

Broader Connections

• Economic models are deliberately simplified representations enabling mathematical reasoning. #corroborates (0.72) — Donald MacKenzie, An Engine, Not a Camera, 40