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Economic uncertainty and econophysics

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  • Schinckus, Christophe

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.

Suggested Citation

  • Schinckus, Christophe, 2009. "Economic uncertainty and econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(20), pages 4415-4423.
  • Handle: RePEc:eee:phsmap:v:388:y:2009:i:20:p:4415-4423
    DOI: 10.1016/j.physa.2009.07.008
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    Cited by:

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    3. Canh, Nguyen Phuc & Binh, Nguyen Thanh & Thanh, Su Dinh & Schinckus, Christophe, 2020. "Determinants of foreign direct investment inflows: The role of economic policy uncertainty," International Economics, Elsevier, vol. 161(C), pages 159-172.
    4. Govorukha, Kristina & Mayer, Philip & Rübbelke, Dirk & Vögele, Stefan, 2020. "Economic disruptions in long-term energy scenarios – Implications for designing energy policy," Energy, Elsevier, vol. 212(C).
    5. Nguyen, Duc Nguyen & Nguyen, Canh Phuc & Dang, Le Phuong Xuan, 2022. "Uncertainty and corporate default risk: Novel evidence from emerging markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    6. Khrennikova, Polina, 2016. "Application of quantum master equation for long-term prognosis of asset-prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 450(C), pages 253-263.
    7. Schinckus, C., 2013. "Between complexity of modelling and modelling of complexity: An essay on econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(17), pages 3654-3665.
    8. Canh P. Nguyen & Christophe Schinckus & Dinh Su Thanh, 2020. "Economic Fluctuations And The Shadow Economy: A Global Study," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-24, September.
    9. Christophe Schinckus & Çınla Akdere, 2015. "Towards a New Way of Teaching Statistics in Economics: The Case for Econophysics," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(3), pages 89-108, September.
    10. Sarabia, José María & Prieto, Faustino & Trueba, Carmen & Jordá, Vanesa, 2013. "About the modified Gaussian family of income distributions with applications to individual incomes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(6), pages 1398-1408.
    11. Canh Phuc Nguyen & Christophe Schinckus & Thanh Dinh Su, 2020. "Economic policy uncertainty and demand for international tourism: An empirical study," Tourism Economics, , vol. 26(8), pages 1415-1430, December.
    12. Cem Çağrı Dönmez & Abdulkadir Atalan, 2019. "Developing Statistical Optimization Models for Urban Competitiveness Index: Under the Boundaries of Econophysics Approach," Complexity, Hindawi, vol. 2019, pages 1-11, November.
    13. Han, Ruokang & Takahashi, Taiki, 2012. "Psychophysics of time perception and valuation in temporal discounting of gain and loss," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6568-6576.
    14. Uechi, Lisa & Akutsu, Tatsuya & Stanley, H. Eugene & Marcus, Alan J. & Kenett, Dror Y., 2015. "Sector dominance ratio analysis of financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 421(C), pages 488-509.
    15. Christophe Schinckus, 2011. "What can econophysics contribute to financial economics?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(2), pages 147-163, June.
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    17. Bach Nguyen & Christophe Schinckus & Nguyen Phuc Canh & Su Dinh Thanh, 2021. "Economic Policy Uncertainty and Entrepreneurship: A Bad for a Good?," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 30(1), pages 81-133, March.

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