Economists have always been keen to borrow principles from the hard sciences. In the 19th century Léon Walras and William Stanley Jevons both started their work with a view to importing the insights of physics into the economic sphere. Irving Fisher, the great neoclassical economist whose 1930s work has been rediscovered during this crisis, even wrote his doctoral thesis at the turn of the 20th century under the supervision of a physicist.
This tendency was given renewed impetus in the mid-20th century by Paul Samuelson's application to economics of mathematical principles derived from thermodynamics. The development of computers able rapidly to analyse data made the development of mathematically elegant economic models particularly desirable, driving the acceptance of concepts such as American economist Eugene Fama's efficient market hypothesis.
Most of the “quants” – financial mathematicians – who used such concepts to build financial models always knew that this project had serious flaws. Emanuel Derman, for example, a physicist turned financier who formerly worked at Goldman Sachs, is credited with playing a central role in the development of models in relationship to derivatives. Yet more than a decade ago, he was warning Goldman Sachs clients of the limitations of derivatives models – he compared their relationship to reality to that between a child's toy car and an actual automobile.