Financial crisis of metaphor

Article

Phillips, Peter J.. 2010. "Financial crisis of metaphor." The Review of Austrian Economics. 23 (3), pp. 223-242. https://doi.org/10.1007/s11138-010-0104-6
Article Title

Financial crisis of metaphor

ERA Journal ID18278
Article CategoryArticle
Authors
AuthorPhillips, Peter J.
Journal TitleThe Review of Austrian Economics
Journal Citation23 (3), pp. 223-242
Number of Pages20
Year2010
Place of PublicationNew York, NY. United States
ISSN0889-3047
Digital Object Identifier (DOI)https://doi.org/10.1007/s11138-010-0104-6
Web Address (URL)http://www.springerlink.com/content/y74m212823m48631/fulltext.pdf
Abstract

This paper presents an analysis of the mathematical models of the prevailing orthodoxy within the field of financial economics in light of the financial crisis. The financial crisis presents a challenge to the language of orthodox financial economics. From an Austrian perspective, this challenge to the language of orthodox financial economics is centred on a small number of pressure points stemming from the mathematical-quantitative nature of the prevailing orthodoxy, especially the distortion of or obstruction to the communication of pertinent 'knowledge' by the adoption of a formalism that pushes aside many of the most important aspects of the human action represented in financial markets. The result is a crystalline structure of mathematical models that suffer from serious salience imbalance. The highly salient features of mathematical objects are not directly applicable to and have a low salience in the list of features of the financial economic reality. The financial crisis has accentuated this salience imbalance. The orthodoxy has experienced a financial crisis of metaphor.

Keywordsorthodox; financial economics; language; Austrian; Austria; formalism; salience imbalance; financial crisis
ANZSRC Field of Research 2020490106. Financial mathematics
350208. Investment and risk management
389903. Heterodox economics
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Byline AffiliationsSchool of Accounting, Economics and Finance
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