Re: zero average profit

From: Ian Wright (ian_paul_wright@HOTMAIL.COM)
Date: Tue Jun 10 2003 - 19:20:13 EDT

```Hello Philip,

I follow Duncan Foley's work quite closely, primarily because I
think it is top notch. I tried to apply the approach he outlined
in his paper, "A statistical equilibrium theory of markets" to the
analytical analysis of my computational model, but found it too
difficult, and instead I got away with something simpler, which
was sufficient for my purposes.

I must admit to not realising there is an important difference
between thermodynamics and statistical mechanics (I perhaps
erroneously lump it all together as statistical physics). I do not
know what reversible near-equilibrium changes are.

It's not a drawback that econophysics raises questions
about possibile similarities between different systems (if this is
your implication). Of course there are always specific differences,
but I think that self-similarity of nature at all scales is ubiquitous,
which is one explanation for the universality of much of
mathematics, and even a rationale for the utility of scientific
analogies.

In my own work I found that at the equilibrium of a simple
commodity economy the price distributions for different
commodities have "temperatures" given by the monetary
expression of labour time (M) multiplied by the labour value
(L) of the commodity. That is, the probability of commodity
i realising price k is given by:
P(k)=(1/ML) * exp(-k/ML)
The expectation of the price variate is simply ML, which is the
average price of the commodity, and analogously the
commodity's "temperature". In this case the average price
is linearly proportional to the labour time necessary
for the commodity's production. All the commodities in the
system share the MEL, as the sectors are in statistical equilibrium,
but are weighted by their interaction times, which are the
sectoral labour values (longer production times, lower interaction
frequencies). Situations in which different systems are in
statistical equilibrium and therefore share temperature parameters
are well studied in statistical physics, but I haven't followed
this up.

I must apologise that I haven't read your papers, but I have
noted that you also employ statistical concepts and the MEL,
so I should get round to it.

-Ian.

>Duncan Foley has written a paper applying thermodynamics to economics,
>rather
>than statistical mechanics
>Classical thermodynamics and economic general equilibrium theory (with Eric
>Smith) http://cepe.newschool.edu/~foleyd/econthermo.pdf
>
>It replaces Walrasiam initial endowments followed by adjustment to
>equilibrium
>with the thermodynamic concept of reversible near-equilibrium changes.  The
>analogue of temperature is different from that in "Statistical Mechanics of
>Money".  Econophysics raises questions like 'is capital analogous to heat,
>or
>whatever?'

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