An early outtake from my book Models.Behaving.Badly. An attempt to explain the principles of neoclassical finance from a rational point of view, and to point out the assumptions and their potential inapplicability. And no mean-variance optimization!!

____

Few people have the gift of grasping nature and using it directly: between knowledge and application they prefer to invent a phantom which they develop in great detail; doing so, they forget both object and purpose.

Maxims and Reflections: Goethe