Modigliani's theory was a powerful searchlight on what was happening... It is the best explanation of what has actually been happening in the great s… - Paul Samuelson

The small investor can now, for the first time, invest in common stocks and bonds in an efficient and convenient way. I am talking about people who don't have $ 10 million; who don't want to take unnecessary gambles; who operate under no Napoleonic delusions of being able to pick winners that will quadruple their money; who begrudge every minute devoted to keeping tax and personal records, and wish to think about their investments only at New Year's and when preparing their tax returns. Disinterested experts in finance prescribe for such people as follows: 1. Depending on your tolerance for the irreducible risks involved in owning common stocks, decide what portion of your nest egg you wish to keep in common stocks: 0, 100, 30 or 70 per cent. No one can decide this for you. You must decide at what point you'll sleep best at night, and whether eventually stocks will provide a better inflation hedge than they have done these last dozen years. ( Many will settle for 50-50. ) 2. For what common stocks you do decide to own, follow the golden rules of prudence : Diversify broadly, hold down costly turnover, keep all fees (and book- keeping !) minimal. 3. The same rules (diversification, etc.) apply to your holdings of tax-free and ordinary bonds. If you have taxable income of $ 20,000 or more, probably the bulk of your bonds should be " municipals " -i.e., state and local issues that escape all Federal tax because Congress refuses to close this loophole. Less affluent people will probably do as well in local savings accounts as in anything else. Now you know what to do. How do you do it?

With the assistance of mathematics, I can see a property of the ninety-nine dimensional surfaces hidden from the naked eye. If an increase in the price of fertilizer alone always increases the amount the firm buys of caviar, from that fact alone I can predict the answer to the following experiment which I have never seen performed and upon which I have no observations: an increase in the price of caviar alone will increase the amount the firm buys of fertilizer. In thermodynamics such reciprocity or integrability conditions are known as Maxwell Conditions; in economics they are known as Hotelling conditions in honor of Harold Hotelling’s 1932 work.

Well, I'd say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that's the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that. The governor of the Bank of England seems to have forgotten or not known that there was no bank insurance in England, so when Northern Rock got a run, he was surprised. Well, he shouldn't have been.
But history doesn't tell its own story. You've got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to.