Ten years after “Worrying trends in econophysics”: developments and current challenges

Abstract

Econophysics has made a number of important additions to scientific knowledge. Yet it continues to lack influence with both economists and policy makers. Ten years ago, I and three other economists sympathetic to econophysics wrote a paper on worrying trends within the discipline. For example, its lack of awareness of the economics literature, and shortfalls in the use of statistical analysis. These continue to be obstacles to wider acceptance by economists. Like all agents, policy makers respond to incentives, and economists understand this very well. Much of the econophysics community appears to think that simply doing good science is sufficient to have the work recognised, rather than relating to the motivations and incentives of policy makers. Nevertheless, econophysics now has three major opportunities to advance knowledge in areas where policy makers perceive weaknesses in what they are presented with by economists. All can benefit from the analysis of Big Data. The first is a core model of agent behaviour which is more relevant to cyber society than the rational agent model of economics. Second, extending our understanding of the business cycle, primarily by incorporating the importance of networks into models. Third, devising proper measures of output in cyber society.