Is Economics the ‘New’ Physics?

For a long time, physicists have had a reputation for boldly venturing into other disciplines. Indeed, in a recent Physics Today article recounting the history of physics since 1931, Spencer Weart specifically mentions the rise of ‘hyphenated physics’ (bio-physics, geo-physics, etc) during this period as a key development.

The natives of the other disciplines, of course, would grumble because they felt that many of these wandering physicists were promiscuous (with no long term commitment to their field) and, more importantly, arrogant. I remember a wanderer saying several years ago, “You know, these metallurgists know a lot of stuff about X. I don’t know how they know so much, but they just do!” Among the natives, the joke is that these promiscuous physicists were just looking for interesting problems, because there weren’t any in physics. I suppose all this is a part of a healthy disdain for other disciplines that scientists imbibe and develop.

I am reminded of all this by this paragraph, quoted in Peter Klein’s post (which was triggered by an earlier post):

Economists are extending the range of their studies to include all of the social sciences. . . . What is the reason why this is happening? One completely satisfying explanation . . . would be that economists have by now solved all of the major problems posed by the economic system, and, therefore, rather than become unemployed or be forced to deal with the trivial problems which remain to be solved, have decided to employ their obviously considerable talents in achieving a similar success in the other social sciences. However, it is not possible to examine any area of economics with which I have familiarity without finding major puzzles for which we have no agreed solutions, or, indeed, questions to which we have no answers at all. The reason for this movement of economists into neighbouring fields is certainly not that we have solved the problems of the economic system; it would perhaps be more plausible to argue that economists are looking for fields in which they can have some success. [from Ronald Coase's 1978 paper titled "Economics and Contiguous Disciplines".

Just replace 'economics' and 'social sciences' with 'physics' and 'natural sciences', respectively, and you have a perfect analogy!

[Peeter Klein's posts also discuss and critique the 'freakonomics' kind of incursions into other fields; do read them.]

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Last year, the New York Times proclaimed ‘econophysics’ as one of the most noteworthy ideas of the year. Given the reputation of physics and economics in their respective domains (natural and social sciences), econophysics sounds like a marriage between two domineering individuals. Has it been a marriage filled with joy and peace? Hardly!

In a recent article in Nature (subscription required), Philip Ball (author of this survey article on interating agent models in sociology) describes the scene rather well. Here’s how the article opens:

For the past two decades, some physicists have been trying to apply their ideas and tools to an area that seems a long way from traditional physics. They are exploring the notion that there might be a kind of physics of the economy — an ‘econophysics’, as it has been dubbed1. Last year, some of these econophysicists even went as far as to suggest that economics might be “the next physical science”.

But now this unlikely marriage is showing signs of turning sour. Even those economists who at first welcomed econophysics are starting to wonder whether it is ever going to deliver on its initial promise. Early successes in modelling financial markets have not led to insights elsewhere, some complain. Matters came to a head at the Econophysics Colloquium, held at the Australian National University in Canberra last November. A group of economists attending the meeting were so dismayed with what they saw many physicists doing that they penned a forthcoming paper entitled ‘Worrying trends in econophysics’.

To me, this paragraph is telling:

So why have some of these physics-friendly economists become fed up? Although Ormerod and colleagues are highly critical of mainstream economic theory, they point out that “economics is not at all an empty box.” The Canberra critique accuses econophysicists of ignoring the existing literature — a charge also levelled at physicists when they began to dabble seriously in biology.

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Over a year ago, I covered a different kind of interdisciplinary war: the one between sociologists and physicists about the theory of social networks.