As an economist with a background in mathematics and physics I very much appreciated ‘econophysics’ and associated efforts, but a short while into my foray I began to realize that economics is afflicted with a dearth of conserved quantities. Physics has plenty of these (sometimes absolute, sometimes approximate) laws of conservation (conservation of energy, conservation of mass-energy, conservation of linear/angular momentum, et cetera) and these laws of conservation are critically important in constraining the dynamics a system can adhere to and thus constitute a kind of ‘shortcut’ that allows apparently intractable problems to be deftly solved by putting these constraints to masterful use. Economics has none of this. Even the apparently solid concept of ‘wealth’ (even in its weaker relative form) upon closer inspection has no fundamental basis: transactions between two parties can affect the market value of an asset and therefore increase or decrease the wealth of all of those who own (or owe) such assets.

The field therefore rapidly decayed into a form of “computational economics”. This might appear similar to “computational physics” and its use of finite element models and massively parallel simulations of particle systems to solve fluid dynamics problems. Trouble is, those systems are built up from elements that respond to the net of extant forces acting upon them, whereas in economics agents can and do act on the basis of what they expect those forces might be in the future. Self-fulfilling prophecies are “very much a thing” in economic and financial phenomenology: bubbles, crashes, recessions, booms, the whole business cycle itself...

Add to that that some actors, even very significant ones, in those markets might have really weird utility functions — for example, central banks seek not to maximise their utility — and that some agents are not rational at all (noise-traders, entrepreneurs misreading trends, & cetera) and you have another big flaw in the framework.