Physicists in Finance Should Pay More Attention to Economists

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Physicists Can Learn from Economists, by Mark Thoma: After attending last year’s Economics Nobel Laureates Meeting in Lindau, Germany, I was very critical of what I heard from the laureates at the meeting.  The conference is intended to bring graduate students together with the Nobel Prize winners to learn about fruitful areas for future research. Yet, with all the challenges the Great Recession posed for macroeconomic models, very little of the conference was devoted to anything related to the Great Recession. And when it did come up, the comments were “all over the map.” And some, such as Ed Prescott, were particularly appalling as they made very obvious political statements in the guise of economic analysis. I felt bad for the students who had come to the conference hoping to gain insight about where macroeconomics was headed in the future.

I am back at the meetings this year, but the topic is physics, not economics, and it’s pretty clear that most physicists think they have nothing to learn from lowly economists. That’s true even when they are working on problems in economics and finance.

But they do have something to learn. ...