Mandelbrot’s fat-tailed model met fierce opposition for undermining standard statistical methods

Evidence

Mandelbrot’s model was of “wild” randomness: periods of limited price fluctuation can be interrupted unpredictably by huge changes. The model initially attracted considerable interest within financial economics (Eugene Fama, in whose work the efficient-market hypothesis crystallized, was the most prominent enthusiast for it), but, as chapter 4 describes, it also met fierce opposition because it undermined standard statistical procedures. In the words of one critic quoted in chapter 4, adopting Mandelbrot’s model meant “consigning centuries of work to the ash pile.” — Donald MacKenzie, An Engine, Not a Camera, 139

Categorization

• XREF: Links to the sociology-of-knowledge theme in this book and to Kuhn’s structure of scientific revolutions, which the author invokes nearby. — connects to: Mainstream statistics training in the 1970s ignored Levy distributions — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 481

Broader Connections

• Mainstream statistics training in the 1970s ignored Levy distributions #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 481