I think the rise of quantitative econometrics and a highly mathematical approach to risk management was the obverse of a decline in interest in financial history.
Interpretation
The quote suggests that an increased focus on quantitative methods in finance has led to a diminished appreciation of financial history.
Niall Ferguson's quote reflects on the shift in financial practices, where the growing emphasis on quantitative econometrics and mathematical models for risk management has overshadowed the lessons and insights that can be gained from studying financial history. This indicates a potential danger in prioritizing numerical analysis over historical context, which could lead to a lack of understanding of past mistakes and patterns in finance.
In practice
In a financial conference discussing the importance of understanding past market crashes.
It's all very well for us to sit here in the west with our high incomes and cushy lives, and say it's immoral to violate the sovereignty of another state. But if the effect of that is to bring people in that country economic and political freedom, to raise their standard of living, to increase their life expectancy, then don't rule it out.
If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.
Civilisation is partly about restraining the male of the species from engaging in the violence of the hunter-gatherer period. But it doesn't take an awful lot to unleash it.
For 500 years the West patented six killer applications that set it apart. The first to download them was Japan. Over the last century, one Asian country after another has downloaded these killer apps- competition, modern science, the rule of law and private property rights, modern medicine, the consumer society and the work ethic. Those six things are the secret sauce of Western civilization.
The West may collapse very suddenly. Complex civilizations do that, because they operate, most of the time, on the edge of chaos.
Over time, the welfare state has become dysfunctional in a surprising way. But in a way it became a victim of its own success: It became so successful at prolonging life, that it becomes financially unsustainable, unless you make major changes to things like retirement ages.
No human investigation can be called real science if it cannot be demonstrated mathematically.
The history of acceptance of new theories frequently shows the following steps: At first the new idea is treated as pure nonsense, not worth looking at. Then comes a time when a multitude of contradictory objections are raised, such as: the new theory is too fancy, or merely a new terminology; it is not fruitful, or simply wrong. Finally a state is reached when everyone seems to claim that he had always followed this theory. This usually marks the last state before general acceptance.
What I like about sceptics is that in good science you need critics that make you think: 'Crumbs, have I made a mistake here?' If you don't have that continuously, you really are up the creek. The good sceptics have done a good service, but some of the mad ones I think have not done anyone any favours.
Geography is just physics slowed down, with a couple of trees stuck in it.
Remember that [scientific thought] is the guide of action; that the truth which it arrives at is not that which we can ideally contemplate without error, but that which we may act upon without fear; and you cannot fail to see that scientific thought is not an accompaniment or condition of human progress, but human progress itself.
I think China knows that in the early stages of Covid, it didn't do what it needed to do, which was to, in real time, give access to international experts, in real time to share information, in real time to provide real transparency.
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