By Alan Hall
*Note: This essay describes the work and research of the legendary econophysicist Dr. H. Eugene Stanley, keynote speaker of the 2016 Social Mood Conference. An extended form of this essay appeared in the February 2016 issue of The Socionomist.
Dr. H. Eugene Stanley is not your average physics professor. In 1973, Soviets in trench coats forcibly removed him from the podium at a scientific conference he was chairing in Moscow, took him to the top of the building and threatened to throw him out a window. Stanley had just announced his plan to allow attendees to hear the presentations of several Russian refusniks who had been barred from the conference. Despite “the worst scare of my life,” he ultimately led a group to the refusniks’ homes to hear their talks, and he later chaired an organization of US scientists that pressured the Soviets to stop persecuting them. His concern with fairness also manifests in his work toward correcting the underrepresentation of women in physics.
Dr. Stanley’s CV since he obtained his B.A. in physics at Wesleyan University in 1962 reads much as a diffusion-limited aggregation spreads, branching out from physics into a wide landscape of diverse fields. He holds concurrent positions of “Honorary Professor” at four international universities, nine Doctorates Honoris Causa, and he has earned innumerable honors for his interdisciplinary contributions to physics, chemistry, biology, biomedical engineering, physiology and polymer studies.
Dr. Stanley says he loves solving puzzles wherever he can find them, and that often means applying physics to other disciplines, such as economics. Collaboration is all-important because more perspectives are better for solving complex puzzles. Stanley coined the term, “Econophysics,” to describe the interdisciplinary application of statistical physics to the study of economics.
For example, when Tobias Preis, a complex systems scientist who presented at the 2013 Social Mood Conference, approached Dr. Stanley and suggested an econophysics project, Dr. Stanley was eager to collaborate. In their 2010 paper in the Journal of Statistical Physics, “Switching Phenomena in a System with No Switches,” one of their goals was to find out if there are general laws that describe market behavior near “switching points,” places where price trends change direction. They studied a time series of the German DAX Future stock market, “14 million transactions recorded with an incredible resolution of only 10 ms [milliseconds], which allows us to analyze in detail all microtrends occurring.” They used a statistical technique common in physics but seldom used in economics: they merged all the data and analyzed it simultaneously. To do so, they “renormalized” the data by simply assigning a time, ε=0 to the start of an uptrend and ε=1 to the end of an uptrend. They did the same for downtrends and found,
[The] volume of each transaction increases dramatically as the end of a trend is reached … while the time interval between each transaction drops… . In other words, as prices start to rise or fall, stock is sold more frequently and in larger chunks. Traders become tense and panic because they are scared of missing a trend switch.
Drs. Stanley and Preis have collaborated on ten papers, so far.
We were honored to have Dr. H. Eugene Stanley as the keynote speaker for the 2016 Social Mood Conference.