Mises, Marschak, And Markowitz: The Socialist Origins Of Modern Portfolio Theory
DOI:
https://doi.org/10.52195/pm.v20i1.853Abstract
This paper shows that Modern Portfolio Theory emerged from the socialist tradition in the aftermath of the socialist calculation debate. After opposing Mises in the debate, the socialist Marschak developed the basic elements of Modern Portfolio Theory and handed them down to Markowitz. Marschak and Markowitz developed Modern Portfolio Theory on the basis of the subjective theory of probability. Their subjective approach must be rejected, for it is based on the self-refuting philosophy of individual relativism. Moreover, Modern Portfolio Theory cannot be reconciled with the correct frequency theory of probability. Modern Portfolio Theory was part of the socialist revolt against reason and was therefore destined to be a scientific failure.Keywords: Modern Portfolio Theory, Socialism, Subjective Theory of Probability, Frequency Theory of Probability, Jacob Marschak, Harry Markowitz
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