Economic uncertainty and econophysics

Christophe Schinckus

Physica A: Statistical Mechanics and its Applications, 2009, vol. 388, issue 20, 4415-4423

Abstract: The objective of this paper is to provide a methodological link between econophysics and economics. I will study a key notion of both fields: uncertainty and the ways of thinking about it developed by the two disciplines. After having presented the main economic theories of uncertainty (provided by Knight, Keynes and Hayek), I show how this notion is paradoxically excluded from the economic field. In economics, uncertainty is totally reduced by an a priori Gaussian framework—in contrast to econophysics, which does not use a priori models because it works directly on data. Uncertainty is then not shaped by a specific model, and is partially and temporally reduced as models improve. This way of thinking about uncertainty has echoes in the economic literature. By presenting econophysics as a Knightian method, and a complementary approach to a Hayekian framework, this paper shows that econophysics can be methodologically justified from an economic point of view.

Keywords: Econophysics; Uncertainty; Economics; Keynes; Knight; Hayek (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:388:y:2009:i:20:p:4415-4423

DOI: 10.1016/j.physa.2009.07.008

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