Thursday, September 23, 2010

The formerly low status of academic finance

At that time [the early 1970s] finance was a field largely outside the rubric of economics. Paul Samuelson has reflected on his own experience: "Finance was my Sunday painting. Sunday painters are not quite in the Club. They publish in unrefereed journals and are not read much." ... Similarly, Stephen Ross remembers being warned as a graduate student at Wharton in 1970 against switching from economics to finance: "Finance is to economics as osteopathy is to medicine." ...

Black and Scholes discovered just how low was the status of finance among economists when they tried to publish their result in economics journals. In the fall of 1970 their paper was rejected in short order by both the Journal of Political Economy and the Review of Economics and Statistics, in both cases without even being sent out for referee report. The editors saw the contribution as a narrow technical one at best, but also not really economics, and hence not even worth considering. ...

The crucial intervention came from Merton Miller and Eugene Fama, who persuaded the Journal of Political Economy to reconsider.
--Perry Mehrling, Fischer Black and the Revolutionary Idea of Finance, on desk rejections of a Nobel Prize winning paper

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