http://oro.open.ac.uk/7942/1/04064850.pdf

Phillips hydromechanical model of the British economy was very ingenious, and there’s a lot to be said for increased use of this type of analog simulation in economics. As Phillips said in his paper describing the machine, “The hydraulic model will give solutions for nonlinear systems as easily as for linear ones.  It is not even necessary for the relationships to be in analytical form: so long as the curves can be drawn (the relationships driven by interconnected slotted plastic graphs driving valves) the machine will record the correct solutions.” As the flows are visible, it was a great teaching tool.

More good analog economic simulators needed.

John Hulls

I am looking for a PhD in SocioPhysics (or at most Socio-Econo-Physics),

and/or funds for it. Do you know something about it?

Any advice is welcome.

Regards,

Loreti

Fredrick Michael, PhD

I started book nr. 5, stochastic processes, with 2 days of lectures at the Sant’ Ana School in Pisa in Apr. 2006, thanks to Giulio bottazzi and Giovanni Dosi.

Harry Thomas convinced me that I had to do Ito calculus right in 2002, Harry died 2 summers ago. He was still intellectually active and was very interested in my work in econophysics. I gave a lecture in memory of him at Geilo, 2011, Harry had been to every Geilo school since 1973, I’ve been to all since 1983. We often teamed up together to get our ideas to the front on the Program Committee.

Giulio invited me to give the Pisa lactures and paid me very well. At that time we’d completed our ensemble analysis of a single historic time series but had not submitted it, so that was left out. That was unfortunate because Giulio’s motivation for inviting me was to get his students up to date on finance analysis. I knew Giulio because of Giovanni (who was a Geilo speaker in 2009), and I met Giovanni at the fnatiastic little workshop at a hot springs above the Rhone Valley in 2002. Yi-Cheng organized that. Paul Ormerod and Giovanni were the only economists present, and they were the first economists I’d met at that time. Incdentally, I met Yi-Cheng’s wife-to-be, Tanya, after the meeting when he picked her up at the Geneva airport. I should mention that Paul and Giovanni broke Yi-Cheng’s budget by ordering more bottles of wine than you can imagine. After each evening session, which ended at midnight, the pair went off for another bottle of wine!

I got into econophysics in 1999 because Yi-Cheng was so inclusive, he encouraged me to write book reviews, help make the web site active, and generally always supported me. He’s the reason I got to visit and lecture in China in 2001 and 2007. I owe him a lot and have enjoyed his company over the years. This is probably my last book related to economics, i’m back to thinking about certain aspects of hydrodynamics after a 30 year break.

Right now at UH Gemunu (the formal advisor) and I have two absolutely first rate econophysics students, one German and one Chinese. Both are self-starters, one couldn’t ask for better students.

The book ends with a chapter that was forced on me by a mathematical reader (Cambridge said the ms was too short and sent it out for evaluation last fall). The reader wanted me to cover semimartingales, a topic I have regarded as uninteresting. I generally only find something interesting if I can use it. Maybe that’s a bad sign, a sign of being too focused due to age. In any case the criticism was a god-send. I was able to understand explain ‘proibability space, measure, flitration’, etc. in terms of n-point densities, observed returns, and statistical ensembles of returns. So I tranlated the formal language of the mathematical priesthood into language that any good student of statistical physics can understand. The mathematicians should benefit from the translation, it connects their otherwise dry definitions to an empirically based pictrue. I.e., to real market behavior. Mathematicians rely on formal definitions and proofs without ever mentioning liquidity. That’s one of the reasons we have a finance crisis. the other reason is deregulation, which allows banks and trading houses essentially to create money at will (shadow banking). I like the ms, I hope you’ll like the book!

Unions aren’t necessary since what’s imported is already a “workers’ paradise”:

http://www.npr.org/2011/06/08/137035251/in-greek-port-storm-brews-over-chinese-run-labor

http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=1&_r=1&hp

http://www.nytimes.com/2012/02/05/business/an-investment-wipeout-that-didnt-have-to-happen.html?_r=1&hp

but what’s little understood is that no ’security’ (they generally should be labeled ‘insecurity’)

can be priced when illiquid. Most complex ‘instruments’ are generally illiquid all the time.

I would appreciate if you could suggest me possible topics/titles for PhD in Econophysics area…

Thanks!

The U.S. federal gov’t., like any central gov’t., can run a deficit and the U.S. deficit is horrendous, on the order of 13 trillion Dollars, equivalent to the official worldwide Dollar supply M3. This debt cannot be paid except via inflation, which would mean destroying the Dollar. The core of the problem is simple. The U.S. has systematically lost manufacturing capacity over 50 years, first to Mexico, then to China. This means fewer jobs and less taxes paid by U.S. citizens and corporations. At the same time (starting 1981) there has been a syste4matic rightwing push to lower taxes while spending (in spite of rightwing rhetoric) has increased. That’s the reason for the U.S. budget deficit. At the same time the worldwide finance crisis is a Dollar crisis. Too many Dollars worldwide (M3/M2≈2, and shadow banking led to money creation via derivatives to the tune of about 60 trillion Dollars) with too little U.S. manufacturing capacity to maintain ‘the value’ of the Dollar. Dollars piling up worldwide wanted a profitable place to park, hence the demand for wild derivatives (toxic waste, in Buffett’s words). Finance markets, especially derivatives, must be strictly regulated. We had regulations in the U.S. prior to 1981, the last finance regulation (Glass-Steagall) was repealed (unwisely) in 1999. Regulations, higher taxes, and support for local manufacturing capacity are all required in the troubled lands. Read Jane Jacobs’ ‘Cities and the Wealth of Nations’. It’s all spelled out there.

Economies do not ’self-organize’ into a stable state. There are no mathematical laws of economics or social systems, thre are only mathematized ideologies like neo-classical economics and rational expectations. The only economic laws that we have are those imposed by parliaments. Otherwise, economies in particular and social systems in general are lawless. Russia is a good example.

The software has features like grand canonical extension, thermal minority game, risk aversion, disproportions between fractions, different payoffs, multi-market option and many others. You can even diversify profiles of investors or group of investors. Additionally, The model can work as a naive sign predictor of an any external signal.

Have fun!