NEWS

Econophysics: Still Controversial After All These Years

See allHide authors and affiliations

Science  24 Jul 2009:
Vol. 325, Issue 5939, pp. 408
DOI: 10.1126/science.325_408

You are currently viewing the summary.

View Full Text

Log in to view the full text

Log in through your institution

Log in through your institution

Summary

Traditional economic theory is fundamentally flawed, econophysicists say. It relies on "representative agent models" in which a hypothetical average Joe interacts with monolithic economic forces. Such models ignore correlations that lead to, say, booms and busts. To prove rigorous theorems, economists assume that market fluctuations follow a bell-shaped "Gaussian distribution," which underestimates the probability of big swings. Econophysicists claim to take a more data-driven approach. They have yet to score a major breakthrough, but they say their contributions are gaining wider acceptance. Still, econophysics does not impress some economists.