Mistaking Economics with Finantial Engineering is a big fail. And blaming Merton & Scholes for the Long-Term Capital Management fiasco is another error: The f

Mistaking Economics with Finantial Engineering is a big fail. And blaming Merton & Scholes for the Long-Term Capital Management fiasco is another error: The fact that they (actually Meriwether, but anyway) invested where they should have not (Russian bonds, look at that! like investing in Greek bonds right now) is just an indicator that we are human. Also, it is quite disputable that the intervention was necessary. The Fed acted short-term (which is one of the big mistakes of modern governments) and it might have gone better than predicted. You can just take a look at the performance of Renaissance Technologies along the years to realize that you can make a lot of money if you really invest (human & technological capital) on it. It is hard, but it can be done. And using maths & CS, little more.