Black-Scholes theory erased the stigma of options as gambling

Evidence

Black-Scholes was really what enabled the exchange to thrive… . It gave a lot of legitimacy to the whole notions of hedging and efficient pricing, whereas we were faced, in the late 60s–early 70s with the issue of gambling. That issue fell away, and I think Black-Scholes made it fall away. It wasn’t speculation or gambling, it was efficient pricing. I think the SEC very quickly thought of options as a useful mechanism in the securities markets and it’s probably—that’s my judgment—the effects of Black-Scholes. I never heard the word “gambling” again in relation to options. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 100

Categorization

• XREF: Financialization literature (Fligstein, MacKenzie) on how economic theory legitimates market institutions. — connects to: Efficient-markets theory helped legitimate options trading that regulators had long banned — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62; The Black-Scholes model legitimized options trading by rebutting gambling stigma — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 703; Black-Scholes rhetoric replaced ‘gambling’ with ‘efficient pricing’ in options discourse — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 705 (+4 more)

Broader Connections

• The Black-Scholes model legitimized options trading by rebutting gambling stigma #corroborates (0.95) — Donald MacKenzie, An Engine, Not a Camera, 703
• Black-Scholes rhetoric replaced ‘gambling’ with ‘efficient pricing’ in options discourse #expands (0.90) — Donald MacKenzie, An Engine, Not a Camera, 705
• Efficient-markets and random-walk theory legitimized options against their scandalous reputation. #corroborates (0.80) — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62
• Options were once stigmatized securities but posed a tractable normal-science pricing problem #qualifies (0.75) — Donald MacKenzie, An Engine, Not a Camera, 140
• Options trading faced regulatory gambling stigma persisting after exchange opening #qualifies (0.75) — Donald MacKenzie, An Engine, Not a Camera, 704