Ping Chen

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Verified

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• Ph.D. in Physics
• Professor Emeritus at Peking University

The view from inside improves our understanding on market failure and regulation failure in financial market. The EMH fails to understand the causes of financial bubbles and crashes. Behavioral finance introduces insight from psychology. The heuristic and biases approach studied behavioral asymmetry in static environment that leads to market irrati...

As Keynes pointed out, classical economics was similar to Euclidean geometry, but the reality is non-Euclidean. Now we have abundant evidence that market movements are nonlinear, non-equilibrium, and economic behavior is collective in nature. But mainstream economics and econometrics are still dominated by linear, equilibrium models of representati...

The book offers an interdisciplinary perspective on finance, with a special focus on stock markets. It presents new methodologies for analyzing stock markets’ behavior and discusses theories and methods of finance from different angles, such as the mathematical, physical and philosophical ones. The book, which aims at philosophers and economists al...

Seminar at Business School, University of Chicago, in 1993

The Hungarian economist Janos Kornai has warned the West of the possibility of a reversal of liberalization in Eastern Europe. He advocates a new policy of containment aimed at countries such as Russia and China. This prompts us to investigate the truth concerning the transition in Eastern Europe. After 1990 the West recalculated economic data from...

An empirical and theoretical analysis of financial crises is conducted based on statistical mechanics in non-equilibrium physics. The transition probability provides a new tool for diagnosing a changing market. Both calm and turbulent markets can be described by the birth-death process for price movements driven by identical agents. The transition...

The sub-prime crisis in the U.S. reveals the limitation of diversification strategy based on mean–variance analysis. A regime switch and a turning point can be observed using a high moment representation and time-dependent transition probability. Up–down price movements are induced by interactions among agents, which can be described by the birth–d...

Both exogenous and endogenous growth theories in neoclassical economics ignore the resource constraints and wavelike patterns in technology development. The logistic growth and species competition model in population dynamics provides an evolutionary framework of economic growth driven by technology wavelets in market-share competition. Learning by...

The aerobic ammonia oxidation is an important process for nitrogen removal from wastewater with high ammonia concentration. Here, we investigated the metabolic properties of a mixed culture of aerobic ammonia oxidizers and determined its optimal reaction conditions. The maximum specific rate of NO(2)(-)-N formation of the culture was 14.9 mg N mg(p...

The Principle of Large Numbers indicates that macro fluctuations have weak microfoundations; persistent business cycles and interrupted technologies can be better characterized by macro vitality and meso foundations. Economic growth is limited by market extent and ecological constraints. The trade-off between stability and complexity is the foundat...

We study the 2008 crisis from three dimensions: economic theory (equilibrium vs. complex-evolutionary economics), economic policy (liberalization vs. anti-trust), and changing world order (from US centered to Big three players).

The Washington Consensus failed to recognize the need of the developing world and the limits of the western mode of industrialization. In last three decades, China experiments a new approach with self-determination, open-minded learning, decentralized experiments, and dual-track reform to simultaneously achieve high speed growth, social stability,...

The US-made grand financial crisis is a natural experiment. We have witnessed the grand failure of the linear equilibrium theory of the efficient market and the emergence of the non-linear evolutionary theory of the viable market. Four observations reveal where the equilibrium theory of asset pricing and business cycles went wrong: the exchange rat...

It is widely believed that an equilibrium framework based on simple models, such as the representative agent and bilateral bargaining, in a frictionless economy provides a consistent framework in micro, macro, finance, and institutional economics. However, equilibrium believes in self-stabilizing market and institutional convergence broken down whe...

The "Washington consensus" and "shock therapy" approach to transition economies ignored the Keynesian lessons from the Great Depression: that market instability is a possibility and there may be an active role of government in managing stability and growth. The severe output decline in East Europe and the former Soviet Union (EEFSU) was triggered b...

Conflicting agendas in corporate governance show the limits of the transaction costs approach and property rights theory. A top-down approach of control and monitor may have negative effect on the competitiveness of the firm. The mechanic picture of transaction costs and agency costs is rooted in reductionism of firm theory. The Coase world of zero...

Introduction: bridging the gap between economics and biology Alfred Marshall once remarked that economics should be considered closer to biology than to mechanics (Marshall, 1890). Living systems have two essential features: life rhythms, and the birth/death process. However, the current economic framework is far from Marshall's dream: economic ord...

The random-walk (white-noise) model and the harmonic model are two polar models in linear systems. A model in between is color chaos which generates irregular oscillations with a narrow frequency (color) band. Time-frequency analysis is introduced for evolutionary time series analysis. The deterministic component from noisy data can be recovered by...

The principle of large numbers shows that the relative deviation for a macro system with N independent elements is of the order of . Lucas’ approach to a microfoundations for macroeconomic fluctuations is thus not capable of explaining the magnitude of observed macroeconomic fluctuations. Arbitrage activity would largely eliminate correlations crea...

Abstract elements in a linear stochastic system with or without growth. Comparing,observed magnitudes,of macro,fluctuations and numbers,of economic,agents in the US economy, the theory of microfoundati on for macro fluctuations has no evidence in the labor market, very little evidence in the goods market, and some weak evidence in the financial mar...

Economic order and structural change can be better understood from the perspective of self-organization under non-equilibrium constraints. The constructive role of instability, prevalence of complexity, and source of bounded rationality are demonstrated by examples of traffic flow, complex business cycles, economic crisis, division of labor, and ec...

The standard random walk model of the stock market is based on the observation that the distribution of logarithmic price changes is unimodal and near-Gaussian. Our study reported here of the S&P 500 price index reveals, however, a multi-humped distribution of price deviations around a long-term growth trend. Histograms observed through a shifting...

The random-walk (white-noise) model and the harmonic model are two polar models in linear systems. A model in between is color chaos, which generates irregular oscillations with a narrow frequency (color) band. Time-frequency analysis is introduced for evolutionary time-series analysis. The deterministic component from noisy data can be recovered b...

Time-frequency representation is helpful in studying the frequency pattern of nonlinear dynamical systems. Specifically, the Wigner-Gabor-Qian (WGQ) spectrogram, a synthesis of the Wigner distribution and the Gabor expansion through time-frequency distribution series, is a very useful tool because it achieves a good solution in time-frequency repre...

This paper argues that the success China's economic reform, contrasted with the difficulties of Eastern Europe and Russia, stems mainly from China's willingness to tolerate decentralized experimentation and a gradual evolution of new institutions, whereas in Eastern Europe and Russia a sense of urgency led to wholesale importation of foreign instit...

Wide evidence of persistent business cycles from macro and financial data was discovered by WGQ spectrogram, which is a new tool of time-frequency analysis based on Wigner transform in Gabor space. The observed time series are detrended by the HP filter. The observed periods are varied between 3 to 7 years that is consistent with NBER business cycl...

Neoclassical models in microeconomics often describe an atomized society, in which every individual makes his or her own decision based on individual independent preference without the communication and interaction with the fellow members within the same community.[1] Therefore, static economic theory cannot explain collective behavior and changes...

Collective behavior with central and bi-modular distribution in social psychology can be studied by statistical mechanics. The Ising model with social temperature was modified by social interaction. The U-shaped distribution for polarized population occurs when social pressure is stronger than independent behavior. This is a typical herd behavior o...

Empirical and theoretical investigations of chaotic phenomena in a macroeconomic system are reported. Evidence of low-dimensional strange attractors is found in several empirical monetary aggregates. A continuous time deterministic model with delayed feedback is suggested to describe the monetary growth. Period doubling to chaos occurs in the model...

The use of deterministic chaos and strange attractor theory as tools in statistical inference is proposed, and an application to econometrics is provided. It is found that high-quality economic data is suitable for the use of those methods. However, low-quality economic data is found to possess a high noise-to-signal ratio, such that the potentiall...

Introduction A major methodological revolution is going on in the physical sciences at the present time as a result of dramatic recent advances in nonlinear dynamics. During the past 10 years, the mathematics and physics literature on strange attractors, bifurcation theory, and deterministic chaos have acquired growing capabilities in many fields....

Empirical and theoretical investigations of chaotic phenomena in macroeconomic systems are presented. Basic issues and techniques in testing economic aggregate movements are discussed. Evidence of low-dimensional strange attractors is found in several empirical monetary aggregates. A continuous-time deterministic model with delayed feedback is prop...

Nonlinear models are introduced to describe the nonequilibrium dynamics of social evolution. The difference between Western and Oriental culture, and their roles in the origin in the division of labour, are described by a behavioural model in information diffusion and learning competition. It shows a tradeoff between stability and diversity. The st...

There are two conflicting views of market economies. Equilibrium school gives a stable image of efficient market without internal instabilities while econophysics reveals an unstable picture at the edge of chaos. The question is how to provide a consistent framework in understanding the Great depression, the market crash, and over investment in bus...

Coase constructed a fantasy world with zero transaction costs. Implicitly, he proposes three hypotheses in his market solution to social conflicts: transaction costs are measurable in cost and benefit analysis of economic institution; transaction costs are driven down by market competition so that optimal institution can be achieved without governm...

Abstract Two fundamental,problems,raise serious challenges to equilibrium economics: the origin of division of labor and the nature of persistent business cycles. Adam Smith once observed that division of labor was limited by the extent of the market. Stigler noted that the Smith theorem was not compatible with a competitive market. The persistent...

The US-made grand financial crisis is a natural experiment. We have witnessed the grand failure of the linear equilibrium theory of the efficient market and the emergence of the non-linear evolutionary theory of the viable market. Four observations reveal where the equilibrium theory of asset pricing and business cycles went wrong: the exchange rat...

Joseph Needham's question Why did capitalism emerge in the West and not in China is discussed along with the sources to form a centralized state and the mechanism for perpetuating the Chinese bureaucracy. The relationship between the stability and complexity of socio -ecological systems is also analyzed. The potential application of nonequilibriu m...

The basic problem in business cycle studies is how to deal with short time series with strong noise and evolving structures. Time-frequency analysis is a powerful tool in analyzing nonstationary time series. The Wigner-Gabor-Qian (WGQ) spectrogram is introduced in studying pattern recognition of business cycles. Stabilized characteristic frequencie...

Coase raised fundamental questions on the firm nature and market solution for social conflicts. However, confusion was around the symmetric intonation of transaction costs, the ill-formulated Coase Theorem, and the false analogy in physics. Fundamental issues in the transaction costs approach can be elaborated by the symmetry assumption in equilibr...

Conflicting polar images of C.P. Snow's two cultures of physical science and the humanities have been changed dramatically because of the breakthrough in nonequilibrium physics and nonlinear dynamics made in recent decades. A new evolutionary paradigm has rapidly altered the beliefs of the Newtonian perspective. The main features of the new world v...