| Fischer Black |
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| 1938 births | |
| 1995 deaths | |
| american economists | |
| throat cancer deaths | |
| university of chicago faculty | |
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BACKGROUND Black received a Ph.D. in Applied Math from Harvard University in 1964 . In 1971 he began to work at the University Of Chicago . He later left the University of Chicago to work at the MIT Sloan School Of Management . In 1984 he joined Goldman Sachs . ECONOMIC CAREER Black began thinking seriously about Monetary Policy around 1970, and found at this time that the big debate in this field was between Keynesian s and Monetarist s. The Keynesians (under the leadership, at that moment, of Franco Modigliani ) believe there is a natural tendency of the credit markets toward instability, toward boom and bust, and they assign to both monetary and Fiscal Policy roles in dampening down this cycle, working toward the goal of smooth sustainable growth. In the Keynesian view, central bankers have to have discretionary powers to fulfill their role properly. Monetarists, under the leadership of Milton Friedman , believe that discretionary central banking is the problem, not the solution. Friedman believed that the growth of the money supply could and should be set at a constant rate, say 3% a year, to accommodate predictable population growth, and that the central bank should become a boring administrative sort of place. On the basis of the Capital Asset Pricing Model , Black concluded that discretionary monetary policy could not do the good that Keynesians wanted it to do. But he also concluded that it could not do the harm monetarists feared it would do. Black said in a letter to Friedman, in January 1972 : ''In the U.S. economy, much of the public debt is in the form of Treasury bills. Each week, some of these bills mature, and new bills are sold. If the Federal Reserve System tries to inject money into the private sector, the private sector will simply turn around and exchange its money for Treasury bills at the next auction. If the Federal Reserve withdraws money, the private sector will allow some of its Treasury bills to mature without replacing them.'' In March 1976 , Black proposed that human capital and business have "ups and downs that are largely unpredictable ... because of basic uncertainty about what people will want in the future and about what the economy will be able to produce in the future. If future tastes and technology were known, profits and wages would grow smoothly and surely over time." A boom is a period when technology matches well with demand. A bust is a period of mis-match. This uncertainty is due to Noise . ILLNESS AND RECOGNITION In early 1994 , Black was diagnosed with Throat Cancer . Surgery at first appeared successful, and Black was well enough to attend the annual meeting of the International Association Of Financial Engineers that October , where he received their award as Financial Engineer of the Year. But the cancer returned, and Black died in August 1995 . As the Nobel Prize is not given posthumously, it was awarded in 1997 to Myron Scholes the co-author of their paper on option pricing, as well as to Robert C. Merton , another pioneer in the development of valuation of stock options. In their announcment, the Nobel committee prominently mentioned Black's key role. He is also a co-author of the Black-Derman-Toy interest-rate derivatives model, which was developed for in-house use by Goldman Sachs in the 1980s but eventually published. SELECTED BIBLIOGRAPHY Literature on Fischer Black
Publications by Fischer Black
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