Physics of Socio-Economic Systems
Department of Economics, University of Kiel
The dynamics of economic systems results from the distributed, uncoordinated activities of a large number of heterogeneous actors. In the absence of detailed knowledge of the precise microscopic motivations, degree of rationality and deliberation of all these interacting agents, it should be advantageous to approach the overall system behavior of complex social and economic phenomena from a statistical perspective. Statistical physics has collected a wealth of methodological approaches for the study of such highly complex systems of a large ensemble of interacting subunits. A particularly relevant set of insights from physics concerns the notion of scaling and universality of complex systems independent of their microscopic details. The findings of such universal scaling laws in socio-economic data suggests that collective mechanisms generating socio-economic universality may have analogues in physical systems. The introduction to the session on the Physics of Socio-Economic Systems will first give an overview over the surprisingly robust properties of the distribution of various measures of economic activity such as wealth income, firm size and financial returns. After reviewing these imprints of collective phenomena, we provide an example of how these ubiquitous empirical observations have been explained as emergent properties of distributed systems of interacting agents in recent literature. We conclude with an assessment of the major methodological contribution of this new strand of research as compared to the more reductionist approach of ‘traditional’ economic theory.