LTCM’s partners treated models as engines of inquiry, not exact market reproductions

Evidence

Merton, Scholes, and the other partners in LTCM were well aware of the status of finance theory’s models as engines of inquiry rather than exact reproductions of markets, and the details of the models used by LTCM were often far less critical to its activities than is commonly imagined. The episode is interesting from the viewpoint of the relationship between models and “reality,” but not by way of the banal observation that the former are imperfect approximations to the latter. — Donald MacKenzie, An Engine, Not a Camera, 153

Categorization

• XREF: Directly contradicts the popular ‘LTCM = blind faith in models’ narrative that most readers know; aligns with the book’s central performativity thesis that models shape rather than merely describe markets. — connects to: LTCM’s crisis did not stem from blind faith in mathematical models. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1017; LTCM’s near-collapse was commonly blamed on blind faith in financial models — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 152
• DEFINE: Rehearses the book’s core distinction between models as cameras (describing) versus engines (constructing reality).

Broader Connections

• LTCM’s crisis did not stem from blind faith in mathematical models. #corroborates (0.85) — Donald MacKenzie, An Engine, Not a Camera, 1017
• LTCM’s near-collapse was commonly blamed on blind faith in financial models #corroborates (0.82) — Donald MacKenzie, An Engine, Not a Camera, 152