Blog-Reference
Econophysicists who intend to apply their methods and tools to economics come in two flavors: either they want to beat one of the financial markets or they want to contribute to the social betterment of mankind.
“Into this unstable situation, propelled largely by contracting opportunities in the physical sciences, but sometimes also by a fervent desire to apply the scientific method to the social betterment of mankind, came an unprecedented wave of trained scientists and engineers into economics. The roll call is stunning, and included Ragnar Frisch, Tjalling Koopmans, Jan Tinbergen, Maurice Allais, Kenneth Arrow, and a host of others. For the first time, noted mathematicians such as John von Neumann, Griffith Evans, Harold Thayer Davis, Edwin Bidwell, Wilson, and others were induced to turn their attention, however briefly, to economics, and to participate in its elaboration rather than to jeer from the sidelines. When this influx of talent became acquainted with the corpus of neoclassical theory, they discovered that it consisted largely of the formal models which they had already mastered in their earlier training in physics, with the only difference being that the vintage of the model was clearly that of the later 19th century. Thus, with only the most passing acquaintance with the long tradition of economic theorizing, these tyros could jump right in and apply more up-to-date mathematical techniques and metaphors to the neoclassical program and come up with far-reaching results.” (Mirowski, 1991, p. 152)
What got lost in the enthusiasm was that the neoclassical approach was fundamentally flawed, to begin with. As a result, economics got even deeper into the cul-de-sac. The real task would have been to replace the flawed conceptual core construction of supply-demand-equilibrium (S-D-E) and not to update it.
It is a curious phenomenon that econophysicists habitually overlook the primacy of theory.
“The mathematical language used to formulate a theory is usually taken for granted. However, it should be recognized that most of the mathematics used in physics was developed to meet the theoretical needs of physics. ... The moral is that the symbolic calculus employed by a scientific theory should be tailored to the theory, not the other way round.” (Wittgenstein, quoted in Schmiechen, 2009, p. 368)
Before you apply the Omory Law of earthquake aftershocks it would perhaps be a good idea to try some correct economics for a start (2014c; 2014a; 2014b).
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2014a). Economics for Economists. SSRN Working Paper Series, 2517242: 1–29. URL
Kakarot-Handtke, E. (2014b). The Synthesis of Economic Law, Evolution, and History. SSRN Working Paper Series, 2500696: 1–22. URL
Kakarot-Handtke, E. (2014c). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
Mirowski, P. (1991). The When, the How and the Why of Mathematical Expression in the History of Economic Analysis. Journal of Economic Perspectives, 5(1):
145–157. URL
Schmiechen, M. (2009). Newton’s Principia and Related ‘Principles’ Revisited, volume 1. Norderstedt: Books on Demand BoD, 2nd edition. URL
Related 'Toolism! A critique of EconoPhysics' and 'Your economics is refuted on all counts: here is the real thing'.
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Wikimedia AXEC121g
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Real-World Economics Blog Mar 14, 2021, Blair Fix, Energizing exchange: Learning from econophysics’ mistakes
"What is important about econophysics, is that it demonstrates a flaw that runs throughout economics: the idea that we can explain macro-level phenomena from micro-level principles."
For more on the Fallacy of Composition see AXECquery.
