Reviewed by
J. Barkley Rosser Jr.
Department of Economics, James Madison University, Harrisonburg, USA
The back cover of this volume claims that it is "the first book providing a panoramic view of these developments in the last one and half decades", referring to the recently developing transdisciplinary fields of econophysics and sociophysics. Given that as self-identified fields these have barely existed for over a decade, it may be arguably the first such edited volume to appear ever, although individuals have written on these areas previously, most notably individuals at the Brussels Free University (Prigogine 1980) and at the Stuttgart Institute of Theoretical Physics (Weidlich and Haag 1983). In both cases, if we are to follow arguments put forth by Rosario Mantegna and Eugene Stanley (2000), what is involved is the phenomenon of physicists using their models to study the respective disciplines of economics and sociology, which is itself a slightly curious way to define things, given that this is itself a sociological definition (who is doing something) rather than one based on the content of the ideas (Rosser 2006). Nevertheless, that is what we see here, a set of 20 papers divided roughly between the two topics, which in turn appear to be written almost entirely by people whose academic backgrounds or current positions are primarly in physics, with two of the editors located at the Saha Nuclear Physics Institute in Kolkata, the location where the term "econophysics" was first neologized by Stanley in the mid-1990s (Rosser 2006). Of the 31 authors of these papers, eight are based in Germany, six in Japan, five in India (with one of these also at the Santa Fe Institute in the US), four in Ireland, three in China, three in the UK, two in France, one in Denmark, and one in Belgium. A wide variety of specific topics are covered, and a wide variety of specific methods are used.
The first half is on econophysics, and here we see topics and methods that have appeared in numerous other volumes with it not clear that anything dramatically new is presented. There is much emphasis on looking for power law distributions of various variables, with two papers focusing on income or wealth distributions (one by Peter Richmond, Stefan Hutzler, Ricardo Coelho, and Przmek Repetowicz, and one by Abhijit Kar Gupta), two papers on foreign exchange market dynamics (one by Yukihiro Aiba and Naomichi Hatano, and one by Marcel Ausloos), a paper on microdynamics of financial markets by Robin Stinchcombe, and a paper on firm growth by Yoshi Fujiwara, Hideoki Aoyama, and Wataru Souma. Other methods were used to study competitive evolution in a population of agents (David M.D. Smith and Neil F. Johnson) and money transfer dynamics (Yogui Wang, Ning Xi, and Ning Ding). Finally, the long opening paper by Juergen Mimkes attempts to describe a general entropy-based approach to modeling economics, with mixed success, although with much originality and ingenuity.
The second section on sociophysics also opens with a general paper by Mimkes, also trying to use an entropy approach, but across a more scattered set of topics in sociology. This section is arguably somewhat more original in that sociophysics is a much less studied and published topic than is econophysics. The result is a much broader array of topics studied and methods used. Probably the most popular method involves networks, following the small worlds approach initiated by Duncan Watts (1999) and associates, with one specifically on social networks by Parongama Sen, one studying memory in neurons and plant cells (not quite sociology) by Jun-Ichi Inoue, and one on innovative dynamics (arguably more economics than sociology) by Sanjay Jain and Sandeep Krishna. Interacting agent models are used to study bifurcations in group dynamics with a paper by Gérard Weisbuch, and two papers by Serge Galam, focusing on such things as opinion dynamics and the spread of terrorism. Power law distributions reappear in a paper on the emergence of popularity by Sitabhra Sinha and Raj Kumar Pan. Finally a variety of methods are used in a paper on crowd dynamics in traffic by Anders Johansson and Dirk Helbing and another on self-organization in supply networks and production systems by Dirk Helbing, Thomas Seidel, Stefan Lammer, and Karsten Peters, with Helbing being perhaps the best known of the authors in this volume in these sorts of efforts, and long a leading expert at the global level in the field of complex dynamic transportation modeling. Unsurprisingly, these two papers with Helbing as a coauthor are among the best in a set that is quite mixed in quality, although all the papers exhibit substantial elements of innovativeness and thoughtfulness.
Besides the papers involving Helbing, the other two that stand out particularly are the two overview efforts by Mimkes. These are perhaps the most ambitious in the book, and the two that make the greatest effort to provide an integrating framework for both econophysics and sociophysics, using the concept of entropy. While I feel that ultimately he falls short in achieving his goal, there is much of interest in both of these papers. I also wish to credit him for being the only one to recognize the important earlier role of Weidlich in these efforts (although one of the Helbing papers cites a paper by him and some others on controlling chaos). This reviewer happens to agree that entropy is probably the leading candidate for a unifying theory of econophysics (Rosser 2007), if not the more diffuse sociophysics, the lack of such an underlying theoretical framework having been a basis of recent criticisms of econophysics by some generally sympathetic (and mostly heterodox) economists (Gallegati, Keen, Lux, Ormerod 2006). While I praise Mimkes for his generally broad view, I fault him for thinking that the effort to apply entropy to economics only began in 1974 (Georgescu-Roegen 1971 actually) with Nicholas Georgescu-Roegen, when in fact there is large literature attempting to do this by identifying energy with money and other such ideas, dating back to the late 1800s, some of it rather embarrassing in retrospect (Rosser 2007). My own view (Rosser 2007) is that the effort by the economist Duncan Foley (1994), which Mimkes cites, provides a more promising avenue of approach, although it predates the neologization of "econophysics" and has not been followed through on much by economists, sociologists or physicists.
In conclusion, the editors are to be commended for having drawn together a set of papers both representative and innovative in these two emerging transdisciplinary fields. This may be the best available volume for covering both so comprehensively.
ReferencesGALLEGATI M, KEEN S, LUX T, and ORMEROD P (2006) Worrying Trends in Econophysics. Physica A, 370: 1-6.
GEORGESCU-ROEGEN N (1971) The Entropy Law and the Economic Process. Cambridge, MA: Harvard University Press.
MANTEGNA RN and STANLEY HE (2000) An Introduction to Econophysics: Correlations and Complexity in Finance. Cambridge, UK: Cambridge University Press.
PRIGOGINE I (1980) From Being to Becoming. San Francisco: W.H. Freeman.
ROSSER JB Jr.( 2006) Econophysics. In LE Blume and SN Durlauf (Eds.), The New Palgrave Dictionary of Economics, 2nd edition, London: Macmillan, in press (available at <http://cob.jmu.edu/rosserjb>).
ROSSER JB Jr. (2007) Debating the Role of Econophysics. Unpublished mimeo, James Madison University (available at <http://cob.jmu.edu/rosserjb>).
WATTS DJ (1999) Small Worlds: The Dynamics of Networks Between Order and Randomness. Princeton: Princeton University Press.
WEIDLICH W and HAAG G (1983) Concepts and Models of a Quantitative Sociology: The Dynamics of Interacting Populations. Berlin: Springer-Verlag.
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