Rosser states econophysics is a promising alternative. I disagree. Of course, one can point to physics-like things in many stochastic models. Heck, the original Black-Scholes was derived via a differential equation used for the heat equation in physics. But as a field, econophysics generates an embarrassment of riches. Models that produce statistical properties–means, variances, jumps–’like’ those we observe in financial time series. But that is too easy.

Generating variance, jumps, phase shifts, is one thing, but to then assert these are laws being obeyed in real time is quite different than fitting them to the peso-dollar exchange rate in the 1980s. I haven’t seen any clean testable hypotheses generated from econophysics, only many papers showing how, with hindsight, various models can emulated the past. That’s not promising, anyone with Excel and a time series can come up with a fun model that has a high R2. If all you want to do is fit, atheoretical approaches are great for that. If you want to predict, you need a theory that restricts.

27-page pdf version

Example given in the paper, moral reasoning by analogy:

‘In seeking protection from Eastern’s creditor’s in bankruptcy court, Lorenzo (Chairman of financially troubled Eastern Airlines), is like a young man who killed his parents and then begged the judge for mercy because he was an orphan. During the last three years, Lorenzo has stripped Eastern of its most valuable assets and then pleaded poverty because the shruken structure was losing money’.

To make the analogical relations redundant and apply Bayes,.you need, as you say to find; ‘the probability that the explicit narrative is true, multiplied by the probability that it can be validly applied with sufficient precision to the implicit problem domain.’

The trouble is with the former probability, you can’t assign such a probability, because there is no precisely definable context-free moral statement you can make, there will always be counter-examples for given situations (See paper).

Put simply, you can never cannot fully detach near-mode details from far-mode narrative, thus independent probabilities can’t be assigned. That’s why Bayes ultimately fails.

– AIDS denialism: AIDS is not caused by the HIV virus, but by environmental factors such as drug abuse

– quantized redshift: redshifts of distant galaxies tend to fall close to multiples of certain values, contrary to most cosmological theories

– cold fusion: loading deuterium into various metal compounds releases anomalous heat and radiation

– laetrile: cures cancer

On the other side are contrarian views which have become accepted. I think to count as contrarian, we need to have had a period of time in which the view was seen as disreputable or at least as unlikely. Sometimes evidence leads to a new model pretty quickly, as when cosmologists discovered in the 1990s that the universe’s expansion was accelerating rather than decelerating. Contrarian successes should look more like paradigm shifts, internal revolutions. A few possible examples:

– punctuated equilibrium as a model for evolution

– some fats are good for you, rather than all fat being unhealthy

– behaviorism fails to explain most human behavior

– monetarist economic theories replaced Keynesian (oh, wait, I mean it the other way around)

A good source of physics-oriented contrarianism going back to the 1980s is John Cramer’s Alternate View columns. Astonishingly, I found that link in a posting I made in 1996, and it is still good (and still being updated).

I’d still appreciate people adding others, if they run across this posting in the future.

Demonstrates that there are perfectly valid analogical arguments that cannot be converted into inductive (bayesian) or deductive form.