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Prediction in physics, economics, finance and management: Similarities and discrepancies |
Czesław Mesjasz |
Cracow University of Economics (CUOE), Rakowicka 27, Kraków 31-510, Poland |
Abstract |
In the beginning of the 21st century special attention is paid to prediction in economics, finance and management. At the same time, new metaphors connected with prediction appear in the narratives about the social life, e.g. “risk society” „radical uncertainty”, etc. Undoubtedly all attempts to apply new mathematical models in economics, finance, management and in a broader sense, in theories of social organization have one aim – a deeper understanding of phenomena allowing for improvement of prediction. Basically two domains of science are useful for that purpose. The first one, a classical approach: statistics, econometrics, operations research, various types of network models, game theory, etc. The new approach can be represented by econophysics which is applied predominantly in finance and in some instances in analysis of collective social phenomena. In all those attempts prediction, or depending on some subtle differences, forecasting, foresight, anticipation are the main purpose. However very often too much attention is given to formal clarity or sophistication and deepened reflections are missing. For instance, while in physics attempts are made to use for prediction a limited set or parameters describing collective phenomena, in econometrics multivariable models are made as to capture the dynamics of the described system. Such issues as limits operationalization, limits of identification and measurement, representation of collective emerging phenomena, intersubjectivity of social phenomena, limitations of applicability of physical models in prediction of social phenomena are not sufficiently analyzed. The main hypothesis of the paper is that a deepened reflection on prediction in economics, finance and management is necessary in achieving potentially more accurate prediction with the classical methods applied in economics and with the methods applied in econophysics. A thorough survey of methods and interpretations of prediction in physics will be presented. Due to its specificity, quantum mechanics will not be taken into account. Special attention will be given to the sense of prediction, identification of parameters and operationalization. Subsequently, the similar survey of methods and interpretations of prediction and related concepts applied in economics, finance and management will be elaborated. The ideas depicted in both parts will be used as a point of departure of critical assessment of all types of methods of prediction applied in economics (both macro and micro level), finance, especially the capital markets, and the models of organizations used in management theory and practice. The proposed study will be used as the source of new general approaches of prediction in economics, finance and management as well as a background of presenting new methodologies of prediction.
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Presentation: Invited oral at 8 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych", by Czesław MesjaszSee On-line Journal of 8 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych" Submitted: 2015-08-28 01:29 Revised: 2015-08-28 01:32 |