Unreasonable Effectiveness of Mathematics

Peter Woit observes that mathematicians and physicists had a prominent role to play in the current financial crises that threaten to take down the world’s banks. Stochastic calculus has become the main tool of evaluating financial derivatives, which are financial instruments whose payoffs are (usually nonlinear) functions of underlying assets. Overly-optimistic assumptions in pricing derivatives have led to large losses throughout the financial sector. The worst case scenario is the kind of widespread economic dislocation not seen since the Great Depression.

Hey, at least it means we have something to be more embarrassed about than Theodore Kaczynski.