Similarities and differences between physics and economics

In this opening talk, we discuss some of the similarities between work bein g done by economists, and by physicists seeking to contribute to economics. We also mention some of the differences in the approaches taken, and justi fy these different approaches by developing the argument that by approachin g the same problem from different points of view new results might emerge. In particular, we review some recent results, for example the finding that there are two new universal scaling models in economics: (i) the fluctuatio n of price changes of any stock market is characterized by a PDF which is a simple power law with exponent 4 that extends over 10(2) standard deviatio ns (a factor of 10(8) on the y-axis); (ii) for a wide range of economic org anizations, the histogram that shows how size of organization is inversely correlated to fluctuations in size with an exponent approximate to 1/6. Nei ther of these two new laws has a firm theoretical foundation. We also discu ss results that are reminiscent of phase transitions in spin systems, where the divergent behavior of the response function at the critical point (zer o magnetic field) leads to large fluctuations. (C) 2001 Published by Elsevi er Science B.V.