The New Science of Finance

If randomly asked to define the term finance, my guess is that most of us would simply say “money”. We often associate any type of finances with money either being borrowed or spent. Although part of this is true, “The New Science of Finance” written by Don Chance and Pamela Peterson, explains finance as an actual science. In their article they define finance as “the study of how money is acquired and invested” (447). They continue by saying that although we are just now acknowledging finance as a “recognized academic discipline, it roots go back centuries. From the days when bankers were called money changers, financiers have had to perform tricky computations, borrowing frequently from higher mathematics” (447).


The idea of finance originally emerged as a result of World War II and has since “evolved into a critically important pursuit, as evidenced by the influence it has had on so many people and institutions” (447). Since then finance has experienced social, economic, and technological changes that allowed such practitioners of finance to develop themselves. Being largely associated with risk, finance is combined with scientific characteristics. “With the advances in computers and the development of increasingly powerful statistical techniques, finance has become a truly empirical science, demanding that its various experiments be as objective, accurate and repeatable as those in particle physics or microbiology ” (447). From an economic stand point, “economists studying finance have taken the body of knowledge about how human beings behave when faced with uncertainty and translated into mathematical descriptions of the way people obtain and invest funds” (447). As a result finance has developed into much more than producing money. It is now seen as a science or academic study. It involves not only numbers but scientific and behavioral aspect of how people invest, spend and react to money