Nassim Nicholas Taleb, author of “The Black Swan,” said investors who lost money in the financial crisis should sue the Swedish Central Bank for awarding the 1990 Nobel Prize for Economics to Harry Markowitz, Merton Miller and William Sharpe, whose theories he said helped bring down the global economy.
“I want to make the Nobel accountable,” Mr. Taleb said Friday in an interview in London. “Citizens should sue if they lost their job or business owing to the breakdown in the financial system.”
Mr. Taleb said the Nobel Prize for Economics conferred legitimacy on risk models that caused investors' losses and taxpayer-funded bailouts. He singled out the award to Messrs. Markowitz, Miller and Sharpe for their work on portfolio theory and asset-pricing models.
“People are using Sharpe theory that vastly underestimates the risks they're taking and overexposes them to equities,” Mr. Taleb said. “I'm not blaming them for coming up with the idea, but I'm blaming the Nobel for giving them legitimacy. No one would have taken (Mr.) Markowitz seriously without the Nobel stamp.”
Mr. Sharpe, a professor of finance, emeritus, at the Graduate School of Business at Stanford University, and Mr. Markowitz, a professor of finance at the Rady School of Management at the University of California, San Diego, didn't return phone calls seeking comment. Mr. Miller, who was a professor at the University of Chicago, died in 2000 at the age of 77.
In his 2007 best-seller “The Black Swan: The Impact of the Highly Improbable,” Mr. Taleb described how unforeseen events can roil markets. He warned that bankers were relying too much on probability models and disregarding the potential for unexpected catastrophes.
A former derivatives trader, Mr. Taleb is a professor of risk engineering at New York University and advises Universa Investments, a fund that bets on extreme market moves.