Nobel Laureate Harry Markowitz Was a Misunderstood Economist
While his Modern Portfolio Theory forced a fundamental change in the assumptions of investing, its central insight remains theoretical.
Harry Markowitz upended what we thought we knew about investing.
Photographer: Shizuo Kambayashi/APHarry Markowitz, who won the Nobel in economic science in 1990 for his work on portfolio theory and the relationship between risk and reward, died last week at the age of 95. He was not only among the most famous and influential economists of the 20th century, but perhaps also the most misunderstood. Milton Friedman, another Nobel-prize-winning economist from the University of Chicago, is supposed to have said of Markowitz’s dissertation, “Nice work, but it’s not economics.”
Neither of the two men remembered Friedman saying that at the time, but both agreed it was not that Friedman denied the importance of securities pricing in economics, it was that Markowitz’s interest was all in the algorithms for constructing portfolios rather than any underlying economic theory.