Last October the EPSRC, my funders, asked me to contact the Science Media Centre about media coverage of the credit crisis. This was because there was a risk, which materialized, that mathematics would come into criticism in light of the credit crisis. A the time the SMC took the view, on the basis I was the only person making the point, that the credit crisis had nothing to do with science. Following my "Was the Credit Crisis a Science Story" piece and an intervention by Lord Drayson’s office, the Science Media Centre arranged for a session on the credit crisis to be included at the World Conference of Science Journalists, which I attended.
At the conference I explained the links between modern financial markets and science, gave a “scientific” perspective of what happened and why, discussed the role of mathematics in relation to finance and in relation to science in general, emphasizing the fact that maths is looking to describe complex and stochastic systems. An issue critical to the future development of all of science.
Three other people were on the panel. During the Q&A an Italian print journalist (I believe from the Italian equivalent of New Scientist) reported that his magazine had devoted a whole issue to the crisis and it had generated the most positive feedback the magazine had had all year. At the end of the session, the Chair asked me what the next big story in finance would be, I said the big story is that successful finance is based on good science, the Chair informed me this was not a story that could be sold to her editor.
Following the session a stream of European science journalists came up to me and told me that in their countries, science journalists had been covering the story and generally there had been a very positive response from the public.
In particular I had a lengthy discussion with two German journalists. One reported that the main German TV science magazine show had, also, devoted a whole program to the crisis, and again it had been very well received. What was disturbing was that he was scathing about the level of understanding of the crisis his British counterparts had displayed in the session. The fact that one of them did not recognize the importance of basing finance on good science “completely misses the point”.
We talked about why British science journalists take this view, and the conclusion was it came down to the British tradition of empiricism; science is about gathering data to build models that explain the world. There is a blind spot to Cartesian rationalism, that science also involves abstract reasoning. In relation to the credit crisis this explains the British (and American) dismissal of French Risk managers with the saying that worry “That’s all very well in practice but what about the theory”. The point is, Anglo Saxon risk management techniques were all very well in practice, up until the point they went wrong. French mathematicians (Artzner) had a theoretical basis for dismissing Value at Risk long before British financiers found out that in practice, it was flawed.
The empiricist-rationalist divide also explains why Continental Europeans have a more catholic view of science. If science is about rational thought it encapsulates mathematics, sociology, anthropology and even history. If it is about the interpretation of numerical data, it does not. Ironically, it looks as if to understand one aspect of the credit crisis, the fact that bankers made decisions based on what they saw in their rear view mirrors, seems to be a sociological question, not a question that can be addressed by the physical sciences.
P.S. Gillian Tett (17/7/09) has discussed the sociological interpretation of "herd behaviour".