- American Physical Society Sites
- Meetings & Events
- Policy & Advocacy
- Careers In Physics
- About APS
- Become a Member
The commentary by James Owen Weatherall, Fisics and Phynance, offers a spirited defense of the migration of physicists to Wall Street hedge funds and investment banking firms but his article misses the mark. He starts by discussing the accusation that the rarefied financial instruments created by “quants” have actually destabilized the markets but then quickly digresses into why physicists are good at predicting market behavior or pricing options. However, Wall Street doesn’t create anything of intrinsic value, it simply serves as a marketplace. The question is, are physicists needed to make the marketplace operate more efficiently? That is, is innovation being stifled because the marketplace is inefficient? I know of no evidence to support this claim. What then would be the best use of our highly trained physicists? I would argue that it would be to employ them in solving the most pressing problems of our day, such as understanding global climate change/disruption, developing clean energy sources, and developing the next generation of electronic devices. The problem is one of priorities. As a nation, we invest tremendous time, effort, and money in training these young scientists but our tax policies and government regulations do not stimulate development and innovation in climate modeling, clean energy, or spintronics. As a result, our young scientists are faced with a choice of limited employment opportunities at relatively poor salaries or ....Wall Street. You do the math.
Donald J. Hirsh
Although I am amused at the imaginative play on words with “Fisics” and “Phynance,” I am not thrilled that APS News is discussing tricky dicky financial models for the benefit of a few greedy vultures at the expense of everyone else and our Nation. A discussed example is hedge fund managers, who gamble with other people's money in an artificially contrived system where they are guaranteed to make huge personal fortunes while everyone else, businesses and our Nation lose.
In this system, there is no positive benefit to society or our Nation. And these hedge fund managers are given special tax breaks to further support their greed. There is no sense of accountability or fairness in this system. Wall Street should NOT be just another gambling joint. All this is addition to outright frauds, deceit and theft as in the mortgage debacle.
The strength of the USA was built on companies that invented, designed, engineered, produced and manufactured useful products such as cars, steel, oil, engines, coal, railroads, electrical power systems, electric motors, transformers, pumps, electric control systems, radios, telegraphs, etc., etc., etc. Wall Street is now just a contrived artificial system for personal profit with no useful contribution to society.
Lake Elmo, MN
There are several different questions one might raise regarding the role of physics and physicists in finance. One question concerns whether physicists' talents serve the greatest good in finance, as opposed to in other fields. Another concerns whether modern finance–physicists notwithstanding–is corrupt or otherwise flawed. With regard to the first, I agree that basic science should have better support both from government and industry, and that physicists may be more productive working in fields other than finance. And as for the second, I have no interest in defending Wall Street excesses. My article and my recent book, however, focus on a third, entirely orthogonal issue, which concerns how to understand the intellectual contributions that physicists have made to financial practice. I believe one can explore the models physicists have developed in finance while remaining entirely agnostic about the moral status of the financial industry writ large. And I believe it is important to do so: Wall Street is here to stay, warts and all; the important question regarding mathematical models is whether we can use them safely and effectively.
Still, let me make just two remarks concerning the other questions. The first is that university physics departments have no difficulty finding excellent candidates for tenure track and research positions. I do not think it is fair to say that Wall Street is syphoning off talent from physics. Instead, young physicists face a lamentably depressed job market. And ironically in this age of shrinking federal research budgets, two of the most significant sources of new science funding today–the Templeton Foundation and the Simons Foundation–were built by philanthropists who made their fortunes through the financial industry. So it strikes me that the relationship between finance and basic research is more subtle than the letter writers suggest.
The second remark is that, as I understand things, the value of financial markets as a public good concerns their ability to transfer capital between those who have it and those who need it for entrepreneurship and innovation. One way in which this transfer can be encouraged is by developing methods for controlling risk, often through financial products that serve as hedges for otherwise dangerous investments. Physicists have been instrumental in developing such products, and in this sense physicists have made a contribution to finance that serves the public good. Of course, it does not follow that all such products are for the best, or that all practices based on such products are morally defensible.
On the Back Page (APS News, March, 2013), James Weatherall wonders why physicists are especially good at financial modeling. He believes that it is because “Physicists have a distinctive way of thinking about mathematical problems. They are experts in approximative thinking, in building toy models and effective theories. This sort of reasoning is just what is needed to take a problem that appears hopelessly complex and find the simplifying assumptions and idealizations necessary to make it tractable.”
That sounds right to me. I question, however, whether such a “distinctive way of thinking” or even any thinking about how to think and what that means is ever expressly addressed during a physics student’s education. I have to wonder if the only individuals who are able to become professional physicists are those who innately possess or otherwise independently acquire the right ways of thinking.
I came into physics out of an authoritarian religious and cultural upbringing. Late in my graduate studies I found myself questioning my very thought processes. Although I finally received a PhD, my awakening was too little, too late, and I was never able to have a career in physics.
To what extent is thinking about how to think part of a physics student’s experience these days, and could the situation be improved?
In his letter in the April 2013 issue of APS News, Jeffery Winkler expressed “shock” at APS Executive Officer Kate Kirby’s statement in the February issue that “Encouraging women to pursue physics is a top priority for us.” He then goes on to imply that by making that statement Kirby has decided a priori that the percentage of women in physics should be 50%. Nowhere in the February article did Kirby express such a position.
All that one really can imply by Kirby’s statement is that perhaps the percentage of women in physics is lower than it could be. And the data seem to support that view. Currently women earn about 21% of bachelor’s degrees in physics, and 17% of PhD degrees. These figures are lower than in the other hard sciences and mathematics.
Times change and people change. At one time the percentages of women in fields like law and medicine in the US were quite small. Now those percentages are roughly 50%.
Why shouldn’t we encourage our daughters as well as our sons to take a look a physics as a possible career? It may be true that relatively few people are attracted to the discipline. However, there is nothing intrinsic about physics itself that should make it less attractive as a career to women than to men. On the other hand, if there are subtle (or not so subtle) biases against women working in physics on the part of the current cadre of physicists, young women thinking about physics as a career might find that off-putting.
Mark H. Shapiro
©1995 - 2017, AMERICAN PHYSICAL SOCIETY
APS encourages the redistribution of the materials included in this newspaper provided that attribution to the source is noted and the materials are not truncated or changed.