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Financial economics at 50: an oxymoronic tautology

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  • M. C. Findlay
  • E. E. Williams

Abstract

The discipline of financial economics is now 50 years old. This paper discusses the evolution of the discipline and describes its present state as being an equilibrium pricing model cojoined with a notion about the efficiency of financial markets. It provides a critique of this "joint hypothesis" and demonstrates that the two parts really do not fit together very well except by making extreme and unrealistic assumptions. The paper concludes with a discussion of how uncertainty has been redefined as risk, which has further been redefined as virtual certainty. Hence, by adding assumptions and redefinitions, the core theory of financial economics as it presently stands is the mere observation that markets clear at a point in time.

Suggested Citation

  • M. C. Findlay & E. E. Williams, 2008. "Financial economics at 50: an oxymoronic tautology," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(2), pages 213-226, December.
    • Handle: RePEc:mes:postke:v:31:y:2008:i:2:p:213-226
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    Cited by:

    1. James Crotty, 2009. "The Bonus-Driven “Rainmaker” Financial Firm: How These Firms Enrich Top Employees, Destroy Shareholder Value and Create Systemic Financial Instability," UMASS Amherst Economics Working Papers 2009-13, University of Massachusetts Amherst, Department of Economics.

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