Abstract

In this opening talk, we discuss some of the similarities between work being done by economists, and by physicists seeking to contribute to economics. We also mention some of the di#erences in the approaches taken, and justify these di#erent approaches by developing the argument that by approaching the same problem from di#erent points of view new results might emerge. In particular, we review some recent results, for example the #nding that there are two new universal scaling models in economics: (i) the #uctuation of price changes of any stock market is characterized by a PDF which is a simple power law with exponent 4 that extends over 10 on the y-axis); (ii) for a wide range of economic organizations, the histogram that shows how size of organization is inversely correlated to #uctuations in size with an exponent 1=6. Neither of these two new laws has a #rm theoretical foundation. We also discuss results that are reminiscent of phase transitions in spin systems, where the divergent behavior of the response function at the critical point (zero magnetic #eld) leads to large #uctuations. c 2001 Published by Elsevier Science B.V.

Citations