Physics Envy: A Collection Of White Papers Identifying Positive Economics, Optimization, Their Role In The Financial Crisis And Solutions-..

The authors begin by re-examining utility theory in order to establish a stable foundation to their work in risk quantification and a markets hypothesis. This fresh perspective offers a truly heterodox methodology, abandoning the assumptions economic and financial theory have depended on for decades. Introducing the updated utility theory into post modern portfolio theory has enabled the authors to demonstrate ex ante efficiency, rather than ex post optimization. The current financial crisis, as well as historical ones, could have been avoided if market participants had a better theoretical framework from which to operate. This work offers such a framework with the guiding principle that the inherent uncertainty of markets cannot be modeled away with convenient assumptions.