Econophysics

Econophysics is an interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or and nonlinear dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics. For an accessible introduction and toy manufacturing model, requiring only first semester calculus, see .

Physicists’ interest in the social sciences is not new; Daniel Bernoulli, as an example, was the originator of utility-based preferences. One of the founders of neoclassical economic theory, former Yale University Professor of Economics Irving Fisher, was originally trained under the renowned Yale physicist, Josiah Willard Gibbs. Likewise, Jan Tinbergen, who won the first Nobel Prize in economics in 1969 for having developed and applied dynamic models for the analysis of economic processes, studied physics with Paul Ehrenfest at Leiden University. Most importantly, Jan Tinbergen has developed the Gravity Model of International Trade that has became the work horse of the international economics.

Econophysics was started in the mid-1990s by several physicists working in the subfield of statistical mechanics. Unsatisfied with the traditional explanations and approaches of economists - which usually prioritized simplified approaches for the sake of soluble theoretical models over agreement with empirical data - they applied tools and methods from physics, first to try to match financial data sets, and then to explain more general economic phenomena.

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