Lars P. Syll — Econophysics

Quote worth pondering.

Lars P. Syll’s Blog
Econophysics
Lars P. Syll | Professor, Malmo University

Jason Smith — Classical Econophysics

That's the title of a book co-authored by Ian Wright (see here) that looks at "statistical equilibrium". Here's Ian….

Information Transfer Economics
Classical Econophysics
Jason Smith

Jason Smith — Statistical mechanics of ants

The decision process in each tiny (but still to complex to model with a computer!) ant brain of what force level to let go and "play dead", to stick together or not, is aggregated into a single number: a viscosity coefficient.

Footnotes:

[1] Recessions and other mass coordination events are the exception, but most of the time, the economy is not in a recession.

The footnote is the reason that macroeconomics is devilishly difficult with respect to prediction. Departures from trend are most significant for prediction and therefore policy, applied macro being political economy. "External shock" (external to the model) is not a satisfying explanation, and it is an admission of failure at prediction, that is, that assumptions are too restrictive to be useful in generating dynamically accurate representational models.

Traders face similar issues in assessing the likely run of a trend (opportunity space), turning points (timing) and the speed and amplitude of swings (volatility). Even though financial investors are dealing with longer term, similar issues apply.

Information Transfer Economics
Statistical mechanics of ants
Jason Smith

Victor Yakovenko — Inequality and Investment Bubbles

"Money, it’s a gas," says the sixties rock group Pink Floyd in their song “Money.” Indeed, physics professor Victor Yakovenko is an expert in statistical physics and studies how the flow of money and the distribution of incomes in American society resemble the flow of energy between molecules in a gas. In his lectures to be delivered on April 19 at New York University and April 20 at the New School for Social Research, Yakovenko will bring his physics-of-incomes study up to date, including a report on the correlation between levels of income inequality and the appearance of financial downturns, such as the dot-com bubble of 2000 and the more recent housing bubble of 2008.

That the rich really are different is a common opinion. It turns out that the rich even have their own physics. Yakovenko, who is a professor at the University of Maryland and also a fellow of the Joint Quantum Institute*, produces a plot of the cumulative percentage of the population versus income. The graph shows that the actual income distribution (the data coming from the IRS) for the poorer 97% of reported returns follows a type of curve---the Boltzmann-Gibbs curve---that applies to the energy distribution of molecules in a gas. The curve is named for 19th century physicists Ludwig Boltzmann and J. Williard Gibbs, pioneers in statistical physics.

By contrast, the upper 3 percent or so of incomes, starting at a tax-return level of about $140,000, lie along a different curve, one named for Vilfredo Pareto, an economist who studied income distributions in the 19th century. This distinction in income curves is generally attributed to the fact that the most affluent segment of society makes more of its income from investments, which are taxed at a lower rate, rather than income from labor.

“A mathematical analysis of the empirical data clearly demonstrates the two-class structure of a society,” Yakovenko says. The lower-97% curve is an example of exponential behavior, while the upper-3% curve is an example of a power-law behavior....

Yakovenko’s pioneering study of the 97% was summarized in a review paper in the journal Review of Modern Physics in 2009 (**) written in collaboration with the distinguished economist J. Barkley Rosser, Jr.

Joint Quantum Institute
Inequality and Investment BubblesVictor Yakovenko | Professor of Physics, University of Maryland
(h/t Clonal in the comments)

Gavin Mendel-Gleason — Econophysics and Socialism: An Interview with Paul Cockshott

Paul Cockshott is a Scottish computer scientist and a reader at the University of Glasgow. His major areas of work includearray compilers, econophysics and thephysical foundations of computability.

He has written a number of books including Towards a New Socialism and more recently Classical Econophysics.

The North Star
Econophysics and Socialism: An Interview with Paul Cockshott

Gavin Mendel-Gleason