Econophysics

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For more information, see: Economics.

Econophysics and the closely-related field of sociophysics are areas of interdisciplinary research using methods and techniques from physics to model economic and other social phenomena respectively. Although examples can be found dating back some way into the literature, both fields came to prominence in the 1990s in response to a number of factors, including perceived crises in traditional economic methodology and analysis, the interest from the finance industry in employing trained physicists as quantitative analysts, and the complex patterns observed in the newly-available high-frequency financial data, which suggested links to various contemporary developments in statistical mechanics and the physics of complexity.

As well as bringing new mathematical and computational techniques to the table, econophysics represents a considerable conceptual shift in its approach to economic problems. Whereas traditional economics has tended to think in terms of steady states, emphasising concepts such as equilibrium, deductive rational behaviour and utility maximisation, econophysics emphasises the dynamical aspects of economic behaviour, focusing on non-equilibrium systems, bounded rationality and multi-agent modelling where the diverse participants have limited computational capacity.

Overview

[1] [2]

Earlier physics-economics interaction

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References

Notes

  1. Stanley, H. E. et al. (1996). "Anomalous fluctuations in the dynamics of complex systems: from DNA and physiology to econophysics". Physica A 224: 302–321. DOI:10.1016/0378-4371(95)00409-2. Research Blogging.
  2. Galam, S., Gefen, Y. and Shapir, Y. (1982). "Sociophysics: a new approach of sociological collective behaviour. I. Mean-behaviour description of a strike". Journal of Mathematical Sociology 9: 1–13.

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