The analysis from the UCLA scientists reaches more troubling conclusions about the situation in Great Britain, where they believe housing prices could be poised for a crash.
The authors also site the segmentation of the U.S. housing market, which housing economists continue to argue is a factor that makes a national decline in the nation’s housing prices highly improbable.
The physicists based their analysis on the science of complexity, which, they say, “explains the spontaneous occurrence of coherent large-scale collective behavior, such as well-functioning capitalistic markets but also financial crashes and depressions, from the repeated nonlinear interactions between the constituents of economies.”
The analysis at UCLA represents a relatively new approach to studying the economy called “econonophysics.”
“Over the past decade, statistical physicists have begun to suggest that economists might want to rethink some of the basic assumptions upon which they construct their models,” writes Philip Ball in “Critical Mass — How One Thing Leads to Another.”
“By importing ideas from physics, say the physicists, economists can start to make sense of the erratic and so far unpredictable behavior of the world’s markets,” Ball writes.
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