Wednesday Academic Dialogue (1-1440)

Book Review

Nicolas Bouleau (2018). The lie of finance: Mathematics, the price signal and the planet, Paris: Editions of l'Atelier

AbdulRazzaq Saed Belabes

Researcher, Islamic Economics Institute

King Abdulaziz University, Jeddah, Saudi Arabia

Wednesday 05-09-2018 (25-12-1439H)

Abstract

The book addresses a fundamental question about the reality of price signals in the global financial markets on which neoclassical theory is based: Can they be considered as basic information in the analysis of facts and the formulation of economic policies to reduce the inequitable distribution of incomes and the damage to the environment? The book shows that the driving of economy by financial markets through price signals is just a ‘lie’. Volatility is an intrinsic characteristic of the financial market that produces smoke, concealing major price trends and externalities that negatively affect people's lives. The book explains how the application of more advanced mathematical theories enhanced the ability to master the advantage of price differentials. As the degree of sophistication rises, application is getting closer to theory. This showsthat mathematical models used in the financial world do not constitute a simple description; they are performative.This leads to an ethical question that is rarely discussed: What mathematics should be used? And for whose benefit?

Key-words: Financial markets, volatility, speculation, mathematical theory of arbitrage, performativity.