Computational and data limits, not theory, made early portfolio selection unusable.

Evidence

No stock analyst could plausibly estimate half a million correlations. Statistical analysis of past correlations was not enough, even if the data for it had been easily available, which in the 1950s they were not, because what was needed for portfolio selection were future correlations. Even if estimates of the latter could somehow be produced, the limited sizes of computer memories in the 1950s and the early 1960s put the resultant computation well beyond the bounds of the feasible. — Donald MacKenzie, An Engine, Not a Camera, 230

Categorization

• DEEPTHINKING: Illustrates the materiality condition at the heart of the performativity thesis: a model’s influence depends on computational feasibility, not merely logical soundness — the ‘engine’ needs hardware and data to run.
• XREF: connects to: Early critics dismissed optimization models as un-implementable fantasies — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 220; Full Markowitz portfolio selection requires millions of pairwise correlation estimates. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 229; Mean-variance portfolio theory requires the restrictive quadratic utility assumption. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 588

Broader Connections

• Mean-variance portfolio theory requires the restrictive quadratic utility assumption. #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 588