Physics & Economics:

Strange Bedfellows?
DR KOUSIK GUHATHAKURTA

The sciences

Economics : study of social system

Physics : a science devoted to unraveling the mysteries of nature

Econophysics: marriage proposal

Economics: definitely the closest relative of natural sciences

Proof ?

the volume of advanced mathematical literature that dominates the

academic world of economics

several of the recipients of the Nobel Memorial Prize in Literature :

mathematicians by training

The sciences

Until recently, the body of economic literature though highly

mathematical in nature, did not borrow directly from the works of
physics

Several aspects of financial markets did attract Physicists

Isaac Newton

serious academic work by physicists in the field of economics only

recently

a parallel perspective of this social science

Eminent physicists like H. Eugene Stanley, Bikas K. Chakrabarti, J.

Doyne Farmer, Jean-Philippe Bouchaud and many others

this new field has now started to gain academic respect

Birth of a new science

According to Bikas Chakrabarti (2005, p. 225), the term econophysics

was neologized in 1995 at the second Statphys-Kolkata conference in
Kolkata (formerly Calcutta), India by the physicist H. Eugene Stanley,
who was also the first to use it in print (Stanley, 1996). Mantegna and
Stanley (2000, pp. viii-ix) define the multidisciplinary field of
econophysics as a neologism that denotes the activities of physicists
who are working on economics problems to test a variety of new
conceptual approaches deriving from the physical sciences.

The New Palgrave Dictionary of Economics, 2nd edition

Early connections

Louis Bachelier 1900

Gaussian Premise

also constantly drew inspiration from classical mechanic

language of analytical mechanics : Lagrange, Hamilton

Walras, Jevon, Fischer, Pareto

the Newton Laplacian deterministic principles continued to enchant the

economists even long after quantum physics

The power of econophysics

Did the economists miss a bus being too preoccupied

with econometric theory sans the data?

The concept of power law and fat-tailed distributions,

quite common weapons in a physicists armory,
attracted the attention of economists after a band of
physicists have used these concepts successfully in
analyzing market behavior

Major directions of work

That study of chaos :a major area of theoretical

nowadays, studies of chaos, self-organised criticality, cellular automata

and neural networks : economical and financial tools.

Firm Growth as a critical phenomenon

try to predict universality in company growth.

Income and wealth distribution

Complex Networks of economy systems

Economy is a many-body system

Econophysics: a birds eye view

ECONOPHYS-KOLKATA I: Econophysics of Wealth Distributions

ECONOPHYS-KOLKATA II: Econophysics of Stock Markets and Minority Games

ECONOPHYS-KOLKATA III: Econophysics & Sociophysics of Markets and

Networks

ECONOPHYS-KOLKATA IV : Econophysics of Games and Social Choices

ECONOPHYS-KOLKATA V : Econophysics of Order-Driven Markets

ECONOPHYS-KOLKATA VI: Econophysics of systemic risk and network dynamics

ECONOPHYS-KOLKATA VII: Econophysics of Agent-based models

ECONOPHYS-KOLKATA VIII: Econophysics

and data driven modelling of market dynamics