For me this is very sad and personal news. Benoit and I had become friends over the last several years, having numerous long conversations about the very wrong turn that economics had taken. He was a brilliant and unusual man whose unorthodox career path nonetheless resulted in fundamental contributions to science and social science that will last for many years. Thus, I have edited the title to the Times obituary from “mathematician” to “polymath.”
Our friendship began when he called me out of the blue one day in response to an email I had sent him about the strange approach the U.S. Supreme Court took to the theory of market efficiency. He was amazed to hear that law professors at his own institution, Yale, actually seemed to believe and teach that markets were efficient.
While Benoit is best known to the wider world for his work on fractals (an example, the “Mandelbrot set” is pictured above), it was actually his earlier foundational work on how prices behaved on the world’s cotton markets that I was interested in. In fact, that work helped lay the basis for his discovery of fractals.
He found in his analysis of price behavior that in fact markets could behave in wild and very difficult to predict fashion. Any idea of smooth and continuous markets, the basis of the theory of efficient markets, was foreign to him. He began a lifelong interest in “roughness” that eventually led to fractals. This work alone should have earned Mandelbrot the Nobel Prize in Economics. You can listen to him explain his views here and here.
My current research project on the behavior of stock exchanges was inspired by Mandelbrot’s ideas. In particular, he noted in response to the recent financial crisis that there is an absence of “inertia” at work in the markets and thus the kinds of large price moves we have seen in recent years, up and down, are to be expected.
My co-author Jenny Kuan at the Stanford Institute for Economic Policy Research and I have been trying to determine if, in fact, good institutional design of capital markets can create a kind of “synthetic inertia” that indeed could help establish more reliable exchanges. If so, then we could have a lower cost of capital and perhaps a healthier economy.
We had hoped, of course, to engage Benoit in a discussion of our results. Sadly, that will not happen.