
The Architecture of Illusion - Part 2: The Ascent of Statistical Man: Quantifying Risk and Reward
The Architecture of Illusion: A History of the Rational Market Myth 1 The Early Days: When Science First Met Unpredictable Prices 2 The Ascent of Statistical Man: Quantifying Risk and Reward 3 The Zenith of Rationality: The Efficient Market Takes Hold 4 The Behavioral Incursion: Finding the Limits of Market Logic 5 The Final Reckoning: Why Perfect Models Fail the Real World ← Series Home From Artillery to Assets The mid-twentieth century brought a surge of fervor for rational, mathematical decision-making, heavily influenced by World War II’s rigorous demands. Techniques born in the high-stakes environment of operations research (OR), such as optimizing bomb fragmentation for maximum impact or using linear programming for efficient shipping, soon found their way into finance. This new scientific approach required abandoning the old financial world of empirical research and “rules of thumb” in favor of pure theory ruled by simplifying assumptions. The shift paved the way for “Statistical Man,” a hyper-rational economic actor who made choices by weighing potential outcomes probabilistically. ...








