Econophysics 664332 222462471 2008-06-29T13:38:06Z Chobot 259798 robot Adding: [[gl:Econofísica]], [[ko:경제물리학]] Removing: [[zh:經濟物理]] '''Econophysics''' is an interdisciplinary research field, applying theories and methods originally developed by [[Physics|physicists]] in order to solve problems in [[economics]], usually those including uncertainty or [[stochastic]] elements and [[Chaos theory|nonlinear dynamics]]. Its application to the study of financial markets has also been termed [[statistical finance]] referring to its roots in [[statistical physics]]. Basic tools of econophysics are [[Probability|probabilistic]] and [[Statistics|statistical]] methods often taken from [[statistical physics]]. Physics models that have been applied in economics include [[percolation]] models, [[chaos|chaotic]] models developed to study cardiac arrest, and models with [[self-organizing criticality]] as well as other models developed for [[earthquake prediction]].<ref>{{cite book |author=Didier Sornette |title=Why Stock Markets Crash? |publisher=Princeton University Press|date= 2003 |accessdate=2008-02-19 |format= |work=}}</ref> Moreover, there have been attempts to use the mathematical theory of [[complexity]] and [[information theory]], theories developed by many scientists among whom [[Murray Gell-Mann]] and [[Claude E. Shannon]], respectively. Since economic phenomena are the result of the interaction among many heterogenous [[Agent (economics)|agents]], there is an analogy with [[statistical mechanics]], where many particles interact; but it must be taken into account that the properties of human beings and particles significantly differ. There are, however, various other tools from physics that have so far been used with mixed success, such as [[fluid dynamics]], [[quantum mechanics]] (including so-called [[quantum economy]]), and the [[path integral formulation]] of statistical mechanics. ==History== Econophysics was started in the mid 1990's by several physicists working in the subfield of [[statistical mechanics]]. They decided to tackle the complex problems posed by economics, especially by financial markets. Unsatisfied with the traditional explanations of economists, they applied tools and methods from physics - first to try to match financial data sets, and then to explain more general economic phenomena. One driving force behind econophysics arising at this time was the availability of huge amounts of financial data, starting in the 1980's. It became apparent that traditional methods of analysis were insufficient - standard economic methods dealt with homogeneous agents and equilibrium, while many of the more interesting phenomena in financial markets fundamentally depended on [[Heterogeneous agents#Social and human science|heterogeneous agents]] and far-from-equilibrium situations. The term “econophysics” was coined by [[H. Eugene Stanley]] in the mid 90's, to describe the large number of papers written by physicists in the problems of (stock) markets, and first appeared in a conference on [[statistical physics]] in [[Calcutta]] in 1995 and its following publications. The inaugural meeting on Econophysics was later organised in [[Budapest]]. Currently, the almost regular meeting series on the topic include: the Nikkei Econophysics Research workshop and symposium, APFA, ECONOPHYS-KOLKATA, ESHIA, Econophysics Colloquium and Bonzenfreies Colloquium. If "econophysics" is taken to denote the principle of applying statistical mechanics to economic analysis, as opposed to a particular literature or network, priority of innovation is probably due to Farjoun and Machover (1983). Their book ''Laws of Chaos: A Probabilistic Approach to Political Economy'' proposes ''dis''solving (their words) the [[transformation problem]] in Marx's political economy by re-conceptualising the relevant quantities as random variables. If, on the other side, "econophysics" is taken to denote the application of physics to economics, one can already consider the works of [[Léon Walras]] and [[Vilfredo Pareto]] as part of it. Indeed, as shown by Ingrao and Israel, [[general equilibrium theory]] in economics is just based on the physical concept of [[mechanical equilibrium]]. There are also analogies between finance theory and [[diffusion]] theory. For instance, the [[Black Scholes#The Black.E2.80.93Scholes PDE|Black-Scholes equation]] for [[option (finance)|option]] pricing is a [[diffusion equation|diffusion]]-[[advection]] equation. It should be noted that econophysics has nothing to do with the so-called "physical quantities approach" to economics, advocated by Ian Steedman and others associated with so-called [[Neo-Ricardianism]], which attempts to deduce prices, values and the rate of profit solely from information about physical inputs to the production process. This has been robustly criticised by adherents of the [[Temporal single-system interpretation]] of Marx's economics. ==Impact on mainstream economics and finance== Papers on econophysics have been published primarily in journals devoted to physics and statistical mechanics, rather than in leading economics journals. [[Mainstream economics|Mainstream economists]] have generally been unimpressed by this work <ref>{{cite journal |author=Philip Ball |title=Econophysics: Culture Crash |journal=Nature |volume=441 |pages=686–688 |date=2006 |accessdate=2007-08-27 |format= |work= |doi=10.1038/441686a}}</ref>. Some [[Heterodox economics|Heterodox economists]], including Mauro Gallegati, [[Steve Keen]] and [[Paul Ormerod]], have shown more interest, but also criticized trends in econophysics. In contrast, econophysics is having some impact on the more applied field of [[quantitative finance]], whose scope and aims significantly differ from those of [[Economics|economic theory]]. Various econophysicists have introduced models for price fluctuations in [[financial markets]] or original points of view on established models <ref>{{cite book |author=Jean-Philippe Bouchaud, Marc Potters |title=Theory of Financial Risk and Derivative Pricing |publisher=Cambridge University Press|date= 2003 |accessdate=2007-08-27 |format= |work=}}</ref> <ref> {{cite journal |author=Enrico Scalas |title=The application of continuous-time random walks in finance and economics |journal=Physica A |volume=362 |pages=225–239 |date=2006 |accessdate=2007-08-27 |doi=10.1016/j.physa.2005.11.024}} </ref> ==References== {{reflist}} ==See also== *[[Sociophysics]] *[[Thermoeconomics]] *[[Bose-Einstein condensation: a network theory approach]] ==Further reading== * [[Rosario N. Mantegna]], [[H. Eugene Stanley]], ''An Introduction to Econophysics: Correlations and Complexity in Finance'', [http://www.cambridge.org/uk/catalogue/catalogue.asp?isbn=0521620082 Cambridge University Press (Cambridge, 1999)] * [[B. K. Chakrabarti]], [[A. Chakraborti]], [[A. Chatterjee]], ''Econophysics and Sociophysics : Trends and Perspectives'', [http://www.wiley-vch.de/publish/en/books/bySubjectPH00/bySubSubjectPH95/3-527-40670-0/?sID=d05b Wiley-VCH, Berlin (2006)] *[[Joseph McCauley]], ''Dynamics of Markets, Econophysics and Finance'', [http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521824478 Cambridge University Press (Cambridge, 2004)] * [[Bertrand Roehner]], ''Patterns of Speculation - A Study in Observational Econophysics'', [http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521675731 Cambridge University Press (Cambridge, 2002)] * [[A. Chatterjee]], [[S. Yarlagadda]], [[B. K. Chakrabarti]], ''Econophysics of Wealth Distributions'', [http://www.springer.com/sgw/cda/frontpage/0,,5-165-72-52121089-0,00.html Springer-Verlag Italia (Milan, 2005)] * [[Hagen Kleinert]], ''Path Integrals in Quantum Mechanics, Statistics, Polymer Physics, and Financial Markets'', 3rd edition, [http://www.worldscibooks.com/physics/5057.html World Scientific (Singapore, 2004)](also available online [http://www.physik.fu-berlin.de/~kleinert/b5 here]) * Emmanuel Farjoun and Moshe Machover, ''Laws of Chaos; A Probabilistic Approach to Political Economy'', London: Verso, 1983. [http://www.probabilisticpoliticaleconomy.net] * [[Philip Mirowski]], ''More Heat than Light - Economics as Social Physics, Physics as Nature's Economics'', [http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521426898 Cambridge University Press (Cambridge, UK, 1989)] * Bruna Ingrao and Giorgio Israel, ''The Invisible Hand - Economic Equilibrium in the History of Science'', The MIT Press (Cambridge, MA, 1990). * Didier Sornette, ''Why Stock Markets Crash: Critical Events in Complex Financial Systems'', Princeton University Press (2004). * Mauro Gallegati, Steve Keen, Thomas Lux and Paul Ormerod, ''Worrying Trends in Econophysics'', Physica A '''370''', 1-6 (2006). ==External links== * [http://www.phys.uh.edu/econophysics.htm Ph.D. program in Econophysics at Univ. of Houston] * [http://www.yaleeconomicreview.com/issues/2006_spring/financephysical.html Finance Gets Physical] - Yale Economic Review * [http://www.unifr.ch/econophysics/ Econophysics Forum] * [http://moneyscience.org/home/tiki-read_article.php?articleId=23 Econophysics Hub at moneyscience.org] * [http://www.ekonofisika.com Indonesian Econophysics On-line] * [http://econophysics.blogspot.com Econophysics Blog] * [http://www.libreriauniversitaria.it/BIT/8889404752/Introduzione_alla_econofisica_in_logica_complementare.htm Introduzione alla Econofisica in logica complementare] * [http://mpra.ub.uni-muenchen.de/6123/ Quantum economy] [[Category:Applied and interdisciplinary physics]] [[Category:Finance]] [[Category:Mathematical finance]] [[Category:Heterodox economics]] [[Category:Statistical mechanics]] [[de:Ökonophysik]] [[es:Econofísica]] [[gl:Econofísica]] [[ko:경제물리학]] [[it:Econofisica]] [[ja:経済物理学]] [[pl:Ekonofizyka]] [[pt:Econofísica]] [[fi:Ekonofysiikka]] [[sv:Ekonofysik]]