Speaking about how someone with a physics background might approach economics, you might prefer intimidatingly-informed commentary over my unfettered-by-knowledge noodling. In that case, you should zip over to Cosma Shalizi’s blog, where he offers a thoroughly-hyperlinked meditation on the state of econophysics. Full of good stuff along the lines of:
So then: why oh why don’t we have better econophysics?
The first reason which occurs to me, now that I’m a dues-paying, card-carrying statistician, is that almost all econophysicists are theoretical physicists, and moreover statistical physicists. (I’m one myself, or at least was through my Ph.D.) Modern physics began, in the 17th century, by fusing mathematical
theorizing and artisanal craft, but one result of our progress has been to impose a specialized division of labor, sharply separating theory and experiment; Fermi was probably the last physicist to be both a great theorist and a great experimenter. (Perhaps this is connected to his invention of Monte Carlo?) This means that it is very rare for a theoretical physicist to analyze actual empirical data (say, measurements of magnetic susceptibility), which is what the experimentalists do. Theorists instead deal with experimental results (say, that the susceptibility depends on temperature in such-and-such a way). In high energy physics, theorists are actually so remote from contact with experimentalists that a separate guild of interface specialists (“phenomenologists”) has arisen to mediate between them. As a natural consequence of this division of labor, theorists receive no instruction at all in data analysis, let alone statistical inference.
There is much more. Jim Cronin once loaned me some videotapes of old news shows from the 1940’s that featured interviews with Enrico Fermi. He was an amazing guy, the kind who would kill time on a free afternoon by coming up with an explanation for the origin of cosmic rays. It’s too bad that, in the popular or semi-popular imagination, his name doesn’t immediately pop up on the list of the demigods of 20th-century physics. You could make a solid case that he should be number two after Einstein.
Crooked Timber links to Cosma’s post, and also features a post by John Quiggin that follows up on mine. He notes that most of my suggestions are well-incorporated into economics, which is no surprise. The part that is judged interesting is the idea that social scientists would be well-served to distinguish between descriptive notions of what people do and prescriptive notions of what is considered “rational.” A blog at The Economist (the magazine they like to call a newspaper) makes a similar point, so maybe there is something there. Indeed, we are informed that this kind of reasoning keeps popping up despite the fact that Joseph Butler demolished it 300 years ago, so there must be something attractive about it. (Hey, David Hume demolished the argument from design before William Paley even popularized it, but you don’t see it fading away, do you?)