Sean Carroll takes a look at economics from the point of view of a physicist:
Economists have a certain way of looking at the world, in which (to simplify quite a bit) people act rationally to maximize their utility. That sort of talk pushes physicists’ buttons, because maximizing functions is something we do all the time. I’m not deeply familiar with economics in any sense; everything I know about the subject comes from reading blogs. Any social science is much harder than physics, in the sense that constructing quantitative models that usefully describe the behavior of realistic systems is made enormously difficult by the inherent nonlinearities of human interactions. (“Ignoring friction” is the basis of 98% of physics, but nearly impossible in social sciences.) But I can’t help speculating, in a completely uninformed way, how economists could improve their modeling of human behavior.
Elsewhere, in a totally unrelated development, Cosma Shalizi unleashes a rant about “econophysics,” and wishes that physicists who must meddle in economics would do a better job of it:
From here on, the “Worrying Trends” authors imply, it’s all down hill, and I
have to agree. When you are dealing with a very, very large amount of very
high quality data, you can get away with using sloppy, not-too-reliably means
of analysis, because your data will save you unless your analytical procedures
are actively malicious. (That goes double if the data are generated by active
processes over which you have considerable control, as in real physics
experiments.) It also helps if you are merely trying to describe patterns in
the data, without framing serious hypotheses about the mechanisms which produce
them. Note, also, that none of the genuine accomplishments really draw on any
of the distinctive concepts or mathematical structures of theoretical physics,
as opposed to the more elementary reaches of probability and stochastic
processes. In other words, these are things economists could have done
themselves, if they’d read better books on random processes
(e.g.)
early in their training.If econophysicists were content to stick to this sort of thing, to the
phenomenology of financial time series (etc.), the situation would
be almost OK. Almost, because even there it is far too common to see
(for example) claims that such-and-such a distribution is a power law, because
there’s a straightish bit on a log-log plot. I have discussed that particular
fallacy ad nauseam elsewhere,
and will just note in passing that even here, the refusal to do statistics
dooms people to talk nonsense. The real point is that econophysicists
are not content with phenomenology based on overwhelmingly large data
sets, but want to get at mechanisms, in all kinds of social and economic
systems, and there things get really ugly. There is a large literature in
econophysics, for instance,
on agent-based
models of financial markets and (supposedly) other forms of collective
behavior, including the formation of public opinion, but not even the authors
of “Worrying Trends”, who are about maximally sympathetic to the movement, list
it as a success. (I will return to the minority game and why I’m so
down on it below.) This is a shame, because it’s actually in the area of
mechanistic models that one might imagine (as I have) that
physicists could make a distinctive contribution.
That’s not a sarcastic comment, by the way. As far as I can tell, they really are totally unrelated. But it’s interesting to see them appear at around the same time.