Making dynamic modelling effective in economics

McCauley, Joseph L. (2004): Making dynamic modelling effective in economics. Published in: Physica A , Vol. 355, (2005): pp. 1-9.

Abstract

Mathematics has been extremely effective in physics, but not in economics beyond finance. To establish economics as science we should follow the Galilean method and try to deduce mathematical models of markets from empirical data, as has been done for financial markets. Financial markets are nonstationary. This means that 'value' is subjective. Nonstationarity also means that the form of the noise in a market cannot be postulated a priroi, but must be deduced from the empirical data. I discuss the essence of complexity in a market as unexpected events, and end with a biological speculation about market growth.

• Item Type: MPRA Paper
• Additional Information: This was the lead plenary lecture at the First Bonzenfreies Colloquium on Econophysics in Alessandria, Italy, in Sept., 2004. The Third Econophysics colloquium will take place in Ancona, Italy, Sept., 2007, sponsored by the Univ. ancona Economics Dept.
• Institution: University of Houston
• Language: English
• Keywords: Economics; fniancial markets; stochastic process; Markov process; complex systems
• Subjects: C - Mathematical and Quantitative Methods > C0 - General; G - Financial Economics > G0 - General; A - General Economics and Teaching > A2 - Economics Education and Teaching of Economics

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