Essentials of Econophysics Modelling, František Slanina, Oxford U. Press, 2014. $74.95 (411 pp.). ISBN 978-0-19-929968-3 Buy at Amazon
In Essentials of Econophysics Modelling, theoretical physicist František Slanina presents a clear, concise, and in-depth treatise of this interdisciplinary field, which draws on methods and models originating in physics and applies them to the understanding of economic phenomena. The author argues that econophysics is “a quest for common principles, common tools, and common consequences found both in physics and economics.”
The book, which attempts to bridge the two mathematical but distinct disciplines, should be accessible to readers from either community provided they have a fair knowledge of undergraduate-level mathematics. It successfully follows a tutorial style and includes exercises and problems at varying levels—from simple ones to short research projects. Concepts and techniques that require significant but elementary explanation are presented in boxes that the advanced reader can skip and the beginner can consult.
As someone who has taught undergraduate courses, written books, and conducted early research in the field, I was impressed by the wide range of topics and exhaustive list of references found in Essentials of Econophysics Modelling. The book also contains complete subject and author indices and many figures and illustrations. For those reasons alone, it is certainly a welcome addition to an existing collection of research monographs and books. I would also recommend it as a textbook to any advanced undergraduate or beginning graduate student who is thinking about doing research in econophysics but is keen to get a quick overview of the subject.
Slanina aptly begins his book with an introduction to empirical treatments of such topics as price fluctuations and clustering and ends it with a discussion of topics and models on social organization. In between, he discusses some important statistical models, including ones for strategic thinking, imitation, and herding. Given the drastic impact that high-frequency trading has had on the business of financial markets, the book could have included more details of the recent approaches and models that describe order-book dynamics—that is, the mechanisms by which buyers and sellers come to agree on a price.
Other chapters deal with such topics as reaction–diffusion models, the theory of complex social networks, and minority-games theory, which is an important contribution by econophysicists to the more general topic of resource allocation. Also addressed are wealth inequality, poverty, and growth—topics whose study mainstream economists traditionally cherish. It is a pity that Slanina did not discuss details of wealth-distribution models, including the kinetic-exchange models that are based on the statistical physics of energy distribution and have become a lively area of research in econophysics.
Each chapter ends with a forward-looking section titled “What remains.” I would have loved to see those sections expanded, but I understand the constraints of space. Still, an overall summary and outlook section would have been useful for anyone who would like to participate in the momentous development of new interdisciplinary methods and models for the study of social or economic phenomena.
Slanina focuses on empirical findings and modeling and intentionally leaves out the practical fruits borne by econophysics—for example, a better understanding of the perceived risky fat-tail distributions that show up in financial and commodity markets. That omission is largely because, as the author humbly says, he does not feel qualified in that area. I think that was a wise decision; the result is a book that can be counted as a substantial result of Slanina’s years of research experience. With Essentials of Econophysics Modelling, he has completed the complex quest he chose to undertake.
Anirban Chakraborti is a professor in the School of Computational and Integrative Sciences at Jawaharlal Nehru University in New Delhi, India. His research focuses on statistical physics and its application to complex systems in the economic and social sciences.
