Mathematical Theory

Nearly a hundred years after its publication, Kurt Gödel's famous proof that every mathematical system must contain propositions that are true - yet never provable - continues to unsettle mathematics, philosophy, and computer science. Yet unlike Einstein, with whom he formed a warm and abiding friendship, Gödel has long escaped all but the most casual scrutiny of his life.

For the past few decades, the financial world has often displayed an unreasonable willingness to believe that "the model is right, the market is wrong," in spite of the fact that these theoretical machinations were largely responsible for the stock market crash of 1987, the LTCM crisis of 1998, the credit crisis of 2008, and many other blow-ups, large and small.

Models are at the centre of everything we do. They act as metaphors that help us better understand the increasingly complex problems facing us in the modern world. Yet in recent years, the validity of the models we use has been hotly debated and there has been renewed awareness of the disastrous consequences when the makers and interpreters of models get things wrong. Drawing on contemporary examples from finance, climate and health policy, Erica Thompson explores what models are, why we need them, how they work and what happens when they go wrong.