We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
I only had time to scan over this article, but this sounds familiar. Isn't there some similarity here with (iirc) the BCCI mess a couple decades ago? Some guy with a Nobel Prize comes up with a formula that works very well. After all, it's a very good formula. Too good. So good that the formula becomes so influential that it begins to affect the market itself. Once the formula moves from being an observation as to what the market is doing to being a fundamental element of the market itself, the wheels start to come off. Recursion is a hard thing to adjust for when you can't guarantee control of all of your inputs.
Economic formulas get weaker and weaker the further you move from the fundamentals of the very basic 1 + 1 of economics, someone somewhere has to produce something that someone else wants to consume.
Re: "In finance, you can never reduce risk outright; you can only try to set up a market in which people who don't want risk sell it to those who do."
They believed that a market for their product could be made or created. I was taught in sales that a market either is or it is not. It really exists or it really does not. Many bankrupt companys have been started with a plan to "set up a market" for their product or idea.