Since the past is known, the future can be modeled. Markets are perfectly efficient. The actions of market traders will price securities correctly. Markets may be out of balance at some point in time, but they will always move back toward balance. In fact, during the first three years of LTCM's history, markets were very placid.
Efficient markets show linear behavior that can be described with calculus and statistics.
Academics like this because it leads to elegant results which make good journal articles, with nice equations. There is, in fact, some reason to believe that markets are efficient. Unlike physics, where theory is eventually tested against experimental results, much of economics seems almost willfully ignorant of the way the market behaves. Those who are active in the market, like George Soros, tend to discount academic theory. Anyone who hears news reports about the stock market will realize that rather than being perfectly efficient, markets are not always placid, but sometimes act like a manic depressive, gripped by wild euphoria one moment and crashes the next.