Financial crisis of metaphor

Phillips, Peter J. (2010) Financial crisis of metaphor. Review of Austrian Economics, 23 (3). pp. 223-242. ISSN 0889-3047

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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.

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Item Type:	Article (Commonwealth Reporting Category C)
Refereed:	Yes
Item Status:	Live Archive
Additional Information:	© 2010 Springer Science+Business Media, LLC. Permanent restricted access to published version due to publisher copyright policy.
Depositing User:	Assoc Prof Peter Phillips
Faculty / Department / School:	Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited:	21 Apr 2010 02:37
Last Modified:	02 Feb 2015 05:35
Uncontrolled Keywords:	orthodox; financial economics; language; Austrian; Austria; formalism; salience imbalance; financial crisis
Fields of Research :	01 Mathematical Sciences > 0102 Applied Mathematics > 010205 Financial Mathematics 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management 14 Economics > 1499 Other Economics > 149903 Heterodox Economics
Socio-Economic Objective:	E Expanding Knowledge > 97 Expanding Knowledge > 970114 Expanding Knowledge in Economics
Identification Number or DOI:	10.1007/s11138-010-0104-6
URI:	http://eprints.usq.edu.au/id/eprint/7383

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