“It has been a common theme in the media that mathematics, especially obscure advanced mathematics, is largely responsible for the catastrophe that doomed the world to the last five years of recession and slow growth.
This theme plays on the fallacy that danger always comes from complexity. It’s a fabrication that obscures the real causes, that makes it easier to say, “Hey, it wasn’t my fault, I was blinded by science.”
The reality is much simpler and less sexy. Wall Street killed itself in a time-honored fashion: Cheap money, excessive borrowing, and greed. And yes, there is an equation one can point to and blame. This equation, however, requires nothing more than middle school algebra to understand and is taught to every new Wall Street employee. It is leveraged return.
The Gaussian Copula Function, opaque to most, is convenient to blame. It allows us to shake off our collective sense of guilt. It obscures the real crime with a motive that doesn’t take a gang of teenage sleuths and they’re dog to sniff out: greed.”