Final answer:
The impracticality of the Markowitz model for commercial use when first introduced was due to computational and data challenges. With advances in technology and greater accessibility to financial data, the model has since become a practical tool for portfolio management. This reflects a broader evolution in economic understanding and the application of market theories to real-world commercial practices.
Step-by-step explanation:
The Markowitz model, also known as Modern Portfolio Theory (MPT), was impractical for commercial use when it was first introduced in 1952 due to the computational complexity and the vast amount of financial data required to calculate the risk and return of each investment. The model's optimization process needed to analyze the covariance between every pair of assets in a portfolio, which, given the technology and data processing capabilities of the era, made it too cumbersome and resource-intensive for practical commercial application.
Over time, advancements in computing power and data processing have drastically improved, enabling the practical application of the Markowitz model in commercial settings. More sophisticated software and increased data accessibility allow investors to efficiently analyze large datasets and perform the complex calculations required by the model, making it a valuable tool for portfolio management.
In addition, the evolution in our understanding of economic principles, and particularly the role of markets in resource allocation, has provided a deeper context for the application of MPT in real-world scenarios. The shift from theoretical models to practical, real-world applicability marks a significant change in the way modern economists view market dynamics and portfolio management.