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Econophysics and Financial Market Complexity

Rickles, Dean (2008) Econophysics and Financial Market Complexity. [Preprint]

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    Abstract

    In this chapter we consider economic systems, and in particular financial systems, from the perspective of the physics of complex systems (i.e. statistical physics, the theory of critical phenomena, and their cognates). This field of research is known as econophysics—alternative names are ‘financial physics’ and ‘statistical phynance.’ This title was coined in 1995 by Eugene Stanley, and since then its researchers have attempted to forge it as an independent and important field, one that stands in opposition to standard (‘Neo-Classical’) economic theory. Econophysicists argue that the empirical data is best explained in terms flowing out of statistical physics, according to which the (stylized) facts of economics are best understood as emergent properties of a complex system. However, some economists argue that the methods used by econophysics are not sufficient to prove the existence of underlying complexity in economic systems. The complexity claim can nonetheless be defended as a good example of an inference to the best explanation rather than a definitive deduction.


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    Item Type: Preprint
    Additional Information: To appear in J. Collier and C. Hooker (eds.), Handbook of the Philosophy of Science, Vol.10: Philosophy of Complex Systems. North Holland: Elsevier.
    Keywords: Econophysics, complexity, complexity systems, statistical physics, economics
    Subjects: Specific Sciences > Probability/Statistics
    General Issues > Models and Idealization
    General Issues > Laws of Nature
    Specific Sciences > Physics > Condensed Matter
    Specific Sciences > Economics
    Specific Sciences > Complex Systems
    Depositing User: Dean Rickles Dean Rickles
    Date Deposited: 29 Jan 2008
    Last Modified: 07 Oct 2010 11:16
    Item ID: 3851
    URI: http://philsci-archive.pitt.edu/id/eprint/3851

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