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Econophysics, Observational

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Encyclopedia of Complexity and Systems Science

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Definition of the Subject

“No science thrives in the atmosphere of direct practical aim. We should still be without most of the conveniences of modern life if physicists had been as eager for immediate applications as most economists are and always have been.” (J. Schumpeter p.6 in [11])

“The free fall is a very trivial physical phenomenon, but it was the study of this exceedingly simple fact and its comparison with the astronomical material which brought forth mechanics. The sound procedure [in every science] is to obtain first utmost precision and mastery in a limited field, and then to proceed to another, somewhat wider one and so on.” (J. von Neumann and O. Morgenstern [5])

These two quotes define fairly well the path that econophysics tries to follow. They both insist on the fact that one should begin by focusing onsimple phenomena even if at first sight they have little practical implications. In what follows we will develop this point but first of all we mustaddress a question...

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Notes

  1. 1.

    Leontief (p. xi in [3]) has even stronger words: “The methods used to maintain intellectual discipline in this country's most influential economics departments can occasionally remind one of those employed by the Marines to maintain discipline on Parris Island [a training camp of US Marines].”

  2. 2.

    In what economists call “empirical econometrics” the researcher necessarily must providea multivariate econometric model which means that even before he analyses the data he already knows the theory which rules the phenomenon. Moreover,all factors whether they have a weak or a strong impact are treated on the same footing. As we will see in the next point this has importantimplications.

  3. 3.

    For more details about thiscase, see [9].

  4. 4.

    Wewill not develop this point here but it can be observed that a bacteria or a cell contains thousands of different proteins which interact invarious ways. In the same line of thought one may recall that living organisms have been around for several billions years whereas societies appeared lessthan 100,000 years ago and states less than 10,000 years ago.

  5. 5.

    It could be argued that one is free to define “socialenergy” in the way which one wishes. However, one should remember that the notion of energy is pivotal in physics only because it is ruled by(experimentally proved) conservation laws, such as the equivalence between heat and mechanical energy demonstrated by James Joule. Naturally, prior todefining a “social temperature”, it would seem natural to define a herd- or swarm‐temperature describing aggregatedpopulations of bacteria, insects or animals. As far as we know, no operational definition of this kind has yet been proposed.

  6. 6.

    Indeed, it is when the speed of the pendulum goes through zero that it is particularly sensitive to externalperturbations; increasing the length of the pendulum reduces the number of oscillations in a given time interval and therefore the drift due tonoise.

  7. 7.

    As a more recent and even less understood case, onecan mention the physicists who keep on trying to observe the cold fusion effect.

  8. 8.

    This question is connected to what isknown in sociology as the Werther effect; for more details see the papers written by Phillips (in particular [7]) and Chap. 3 in [9].

  9. 9.

    According to a report that Prime MinisterHermann Jonasson sent to the American Headquarters, there were 136 incidents between troops and Icelanders during the period between July 1941 (arrival ofthe American troops) and April 1942 (Hunt 1966) in Reykjavik alone. Unfortunately, no copy of this report seems to be available at the National Archivesof Iceland.

  10. 10.

    It can be noted that similarly to what would happen in 2003 for the invasion of Iraq, these air strikes were carried out without the authorization of the United Nations Security Council.

  11. 11.

    New York Times, Sunday 26 November 2000, Magazine Section, p. 43, 7705 words; the article by Roger Cohen is entitled: “Who really brought down Milosevic”. What makes this account particularly convincing is the fact that it was preceded by another article entitled: “US anti‐Milosevic plan faces major test at polls” which appeared on September 23, 2000 (p. 6, 1150 words); this article described the way Milosevic would be removed from power two weeks before the events. The article makes clear that the course of events would be the same no matter what the results of the election would be.

Abbreviations

Cross national comparisons:

Comparing cross‐national data for a specific phenomenon, e. g. a surge in housing prices, is the key to distinguishing between essential factors which are common to all episodes and those which are accessory and context dependent.

Economathematicians:

Mathematicians or theoretical physicists who develop mathematical tools, models or simulations for social phenomena but do not try to confront these models to actual observations.

Econophysics:

A field of physics which originated in the mid-1990s. Throughout this article, we use the term in a broad sense which includes econophysics, sociophysics and historiophysics. As a matter of fact, these fields can hardly be studied separately in the sense that economic effects depend upon social reactions (e. g. reactions of consumers to advertising campaigns); furthermore, economic investigations crucially rely on statistics which typically must combine present‐day data with data from former historical episodes.

Econophysicists:

Physicists who study social, economic or political issues.

Endogenous mechanisms:

Models usually describe endogenous mechanisms. For instance a population model would describe how people get married and have children.

Exogenous factors:

Exogenous factors are more or less unexpected external forces which act on the system. Thus, for a population wars or epidemics may bring about sudden population changes. It is only when exogenous factors are recurrent and fairly repetitive that they can be taken into account in models.

Experiment:

Apart from its standard meaning in physics or biology we also use this term to designate the process of (i) defining the phenomenon that one wants to study (ii) locating and collecting the data which are best suited for the investigation (iii) analyzing the data and deriving regularity rules or testing a model.

Model testing:

Before confronting the predictions of a model to statistical evidence it is necessary to ensure that the system was not subject to unexpected exogenous shocks. The impact of exogenous factors which are not accounted for in the model must in some way be removed, that is to say the data must be corrected in a way which takes these shocks out of the picture. Usually, such corrections are very tricky to implement.

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Authors and Affiliations

  1. Institute for Theoretical and High Energy Physics, University of Paris 7, Paris, France

    Bertrand M. Roehner

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    Robert A. Meyers Ph. D. (Editor-in-Chief) (Editor-in-Chief)

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Roehner, B.M. (2009). Econophysics, Observational. In: Meyers, R. (eds) Encyclopedia of Complexity and Systems Science. Springer, New York, NY. https://doi.org/10.1007/978-0-387-30440-3_168

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