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Title: Economics and econophysics in the era of Big Data
Authors: Cheong, Siew Ann
Keywords: Economics
Big data
Issue Date: 2016
Source: Cheong, S. A. (2016). Economics and econophysics in the era of Big Data. The European Physical Journal Special Topics, 225(17), 3159-3170.
Series/Report no.: The European Physical Journal Special Topics
Abstract: There is an undeniable disconnect between theory-heavy economics and the real world, and some cross polination of ideas with econophysics, which is more balanced between data and models, might help economics along the way to become a truly scientific enterprise. With the coming of the era of Big Data, this transformation of economics into a data-driven science is becoming more urgent. In this article, I use the story of Kepler's discovery of his three laws of planetary motion to enlarge the framework of the scientific approach, from one that focuses on experimental sciences, to one that accommodates observational sciences, and further to one that embraces data mining and machine learning. I distinguish between the ontological values of Kepler's Laws vis-a-vis Newton's Laws, and argue that the latter is more fundamental because it is able to explain the former. I then argue that the fundamental laws of economics lie not in mathematical equations, but in models of adaptive economic agents. With this shift in mind set, it becomes possible to think about how interactions between agents can lead to the emergence of multiple stable states and critical transitions, and complex adaptive policies and regulations that might actually work in the real world. Finally, I discuss how Big Data, exploratory agent-based modeling, and predictive agent-based modeling can come together in a unified framework to make economics a true science.
ISSN: 1951-6355
DOI: 10.1140/epjst/e2016-60131-x
Schools: School of Physical and Mathematical Sciences 
Rights: © 2016 EDP Sciences, Springer-Verlag. This is the author created version of a work that has been peer reviewed and accepted for publication by The European Physical Journal Special Topics, EDP Sciences, Springer-Verlag. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [].
Fulltext Permission: open
Fulltext Availability: With Fulltext
Appears in Collections:SPMS Journal Articles

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