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Merge thermodynamics and economics

Are they the same thing?
  (+4, -7)
(+4, -7)
  [vote for,
against]

I've been thinking about the interesting parallels between energy and money recently, which comes up a lot. It seems to me there may be a parallel between at least the laws of thermodynamics and economics, so that there could be a tendency for person A to have the same amount of money as person C if they both have the same amount as person B, and so on. You're going to have to watch this space with that one because i'm short of time here.
There are also economic "laws", which because they may be in the social sciences are harder to test. I would suggest that if some rational set of conversion principles between economics and thermodynamics can be found, those laws could be translated into thermodynamic principles and tested scientifically using physical models rather than economic ones. So, eventually it would be possible to come up with new and more sophisticated laws of thermodynamics based on corroborated economic theories, and to rationalise economics in terms of natural science.

Yes, i know it's all a bit squishy but i'm in a hurry.

nineteenthly, Feb 13 2009

Maslow's Heirarchy of Needs http://en.wikipedia..._hierarchy_of_needs
[DrBob, Feb 13 2009]

Thermoeconomics http://en.wikipedia...iki/Thermoeconomics
The principles from which the Energy Accounting system was derived [myislanduniverse, Feb 13 2009]

These people might be three times cleverer than I am but have been happylonged on littering They will spend years happier than my happiest moment Their partial state space psychogeoenergetics could benefit everybody (them as well as society) http://www.youtube....watch?v=hqAgzWSwdV8
a fundamental aspect of what was known as economics was semiporous tribal groups navigating scarcity, absent scarcity or tribe there is absence of economics [beanangel, Feb 14 2009]

Long Term Capital Management http://en.wikipedia..._Capital_Management
An attempt to apply scientific principles to market trading which met with rather predictable disaster. [DrBob, Feb 19 2009]

The Gaussian copula formula. http://www.wired.co...zine/17-03/wp_quant
A more recent tale of relying on math to try and model a market. [DrBob, Feb 25 2009]

[link]






       Persons with a lot of money are not wont to share it, heat is always spread around, so i do not see the parallels here....
loonquawl, Feb 13 2009
  

       Haven't we already reached money death of the (economic) universe?
coprocephalous, Feb 13 2009
  

       The Laws of Econodynamics!   

       I like the idea too - but think it's going to be tricky to boil things down to first principles.   

       I do think there's a link between thermodynamics and the rules governing populations engaging in economic activity - but it's via a couple of stepping stones.   

       The start point has to be the 2nd Law of Thermodynamics: "The entropy of an isolated system not in equilibrium will tend to increase over time, approaching a maximum value at equilibrium."   

       This says things about time, decay and the shift from order towards chaos. In cosmic accounting, entropy is a force that makes things (bread, milk and eggs for example) worth less today than they were worth before - a form of cosmic inflation.   

       If entropy increases over time and causes everything to devalue - what acts on the credit side of the universal ledger?   

       Life!   

       Things that replicate themselves, creating (contrary to the 2nd Law) order over time - they can stack things, build things, create things - a 'thing' in this instance being something that causes the 2nd Law to be temporarily defied - a unit of order, or growth.   

       So (and I think it's been mooted here before) there ought to be a 5th Law of Thermodynamics that describes this unique property of spontaneous order to temporarily defy the 2nd Law through self-replication - and, by means of self-replication, increase levels of order and complexity. Complexity feeds back on itself and over time, creates situations where more complexity (and associated order) can arise.   

       From this 5th Law, you should be able to build a proper set of Laws that govern and describe the propagation of self-replicating objects within an environment containing one or more sources of resource.   

       This model should describe development of life, and eventually the drivers towards speciation, niche fitting developments (primary converter, ruminant, carnivore, detrivore, parasite, virus, etc) all eeking out the best 'usage' of the available energy in order to satisfy the 5th Law.
zen_tom, Feb 13 2009
  

       //There are also economic "laws"//

I'm not convinced that there are, actually. Economics is conceptually based whereas thermodynamics (insofar as my poor and inadequate brain understands it) proceeds from the observation of certain physical constants.

Maslow's famous "heirarchy of needs" (linky) was an effort to do something in the direction of your proposal but in the end it is just tosh because it is trying to assign the quality of a physical law to things that are based on perception rather than physical reality and anyone/thing that didn't fit in with the 'law' was discarded as aberrant or mentally ill.
DrBob, Feb 13 2009
  

       Surely by spreading the range of objects with intrinsic value and the value of the objects over time is the same as entropy?
miasere, Feb 13 2009
  

       What is "intrinsic value"?
DrBob, Feb 13 2009
  

       value belonging to the essential nature or constitution of a thing. EG sand, silicon dioxide, silicon waffers, silicon chips, micorcontrollers, microsystems etc.
miasere, Feb 13 2009
  

       Ah but that is the point. Nothing has an "intrinsic value". Value is defined purely by our own subjective evaluations. For example, as far as I am concerned gold has no intrinsic value whatever.
DrBob, Feb 13 2009
  

       If we followed the proposed 5th Law definition, then something that has value would be anything that furthers a replicator's efficiency in enacting the 5th Law.
zen_tom, Feb 13 2009
  

       I love it, but I am not sure if it is an idea to think of economics scientifically. I think I have a few times compared bad economics with perpetual motion machines. Inflation doesn't help. Spending and borrowing doesn't change a thing. Diversion of recourses through taxes removes more incentive than it injects into government projects. Money misunderstood hides the fact that supply is demand and the above mistakes follow, just like we have seen a thousand times here with half baked energy schemes that people haven’t quite worked out. Economists will tell you that economics is not a hard science. I think all that means is that there are a lot of stupid people accepted in the economics field.   

       There is no such thing as a trade imbalance was something I learned fairly recently unless you count forgiving debt. But you could look at that as overvaluing the services provided.
MercuryNotMars, Feb 13 2009
  

       [DrB], you are simply adding to the entropy by giving gold a low valuation compared tot he general view. If you value gold at 0% and the average price is 100% then there must be a person valuing it at 200% on average (in a 2 person system). If everyone valued something at 100% then there would be no entropy because there would be no dissorder.   

       It would however be interesting to model supply chains in an economodynamic way as it would appear that it flows from areas of low wealth to areas of high wealth.
miasere, Feb 13 2009
  

       The Technocracy movement of relative "popularity" in the 1930's advocated a type of economy based upon "Energy Accounting" and which drew heavily from thermodynamics in a manner akin to the preexisting field of "thermoeconomics" (see link).
myislanduniverse, Feb 13 2009
  

       nonsense.
WcW, Feb 13 2009
  

       [loonquawl], that might mean the economic system is based on shaky principles, for instance the nature of value and work might be misconceived.
[zen_tom], i like all of that actually, but don't know what to say about it!
I've found the hierarchy of needs useful for people who feel guilty or ashamed of their material privileges, and i don't think it's unfair because no matter how rich someone might be there are still things like relationship issues, emptiness, domestic violence, sexual problems and so forth. However, there is the issue of higher and lower pleasures. I should probably reassess them in terms of what you say, [DrBob].
There is sometimes a link between the amount of work put into something and its cost, which makes childminding for people on minimum wage really difficult, for example. There are also levels of abstraction, where the question may be one of investment or perhaps a retreat from the better-founded types of value.
[MercuryNotMars], thanks. Economics doesn't appear to be an empirical science, but it does involve such things as mathematics. However, maybe it could be one. It seems to me that there is economics as it stands, which of course i have difficulty grasping, and there is thermodynamics, which ultimately appears to be based on processes determined by probability and therefore is pretty well-founded, but there's also a lot of room for argument concerning how you would convert one to the other.
[myislanduniverse], i find technocracy fascinating but it seems to require a lot of large-scale centralisation. It may work, and my mental jury is out on that one.
[WcW], sorry, i'm missing context on that one.
nineteenthly, Feb 13 2009
  

       Science doesn't account for something? I suppose you arrived at that conclusion scientifically? Proving that there is no rhyme or reason. I have found everyone who has ever said that to be an idiot. Something that is not understood cannot be understood.   

       The amount of wealth (which is the cure for poverty) that people have is dependant on how much people produce. People do already work to provide for people they want to help. People should not be paid to do what they want. People are paid to do what other's want. How does presenting you with options wreck the world [bigsleep]? Every deal every exchange is a voluntary agreement between two people that own it. You will never be able to change the economy to overcome that. You need to convice people to want what is best and they will make deals based on that,not that I think you know what is best.
MercuryNotMars, Feb 13 2009
  

       I certainly think that is claimed to be non-imperial. I was reading my comments to [bigsleep] and though not directed at you I think it applies. I thought you were starting to see some similarities to hard science.   

       If chemists were confronted with chemistry only on the atomic level we would still be calling it an art too
MercuryNotMars, Feb 13 2009
  

       It appears to me that thermoeconomics is economics of thermodynamics not thermodynamics applied in discribing economics.   

       I think [nineteenthly] is discribing economics in terms of thermodynamics. Entropy is a fairly complicated thing. I think I only scratched the surface with respect to studying lasers so I have a have a fear that I might not recognize rubbish when I see it.   

       I think we are talking about something like how it is harder to stack the blocks than to knock them down and lift them up. It is something we already measure and assess on our own. Money already takes care of the complicated interrelations.
MercuryNotMars, Feb 13 2009
  

       Science is valid in particular areas but lacks S-intension and possibly also intention. It isn't always useful because substitution can fail to preserve S-intension and it isn't about truth but verisimilitude, corroboration and evidence. I'm not very interested in pursuing that thought right now though.   

       It's perfectly feasible to me that there could be a translation involved here. I think the most fruitful avenue would be pursuit of the concept of work. Work frequently reduces entropy, and that would apply even to the likes of jewellery and gemstones which lack much obvious utility. Energy is embodied in food and is released by the Krebs Cycle, and also invested in the upbringing and education of children along with training and experience, which is one reason why a professional might be paid more than an unskilled worker. A cleaner reduces entropy. There would seem to be a problem with the likes of demolition.   

       It also presumably implies that on a simplistic level, a seed is cheaper than a crop plant, and that animal fodder is cheaper than meat.   

       So, how would it go?   

       (Can't get the zeroth, sorry, maybe that's important because it's the basis)   

       One: Value can neither be created nor destroyed but only converted, so the value of the Universe is constant.   

       Two: Poverty or perhaps the loss of value tends towards a maximum.   

       Three: As value approaches zero, economic transactions cease.   

       Also, that old restatement, "you can't win, you can't break even, you can't leave the game" would seem to work fairly well.   

       How does gambling fit in?
nineteenthly, Feb 13 2009
  

       // //The amount of wealth (which is the cure for poverty) that people have is dependant on how much people produce.//   

       That one is very easy to clear up. At some point wealth is not defined by how many mp3 players you can make or consume. One is probably enough. Poverty has more to do with the lack of distribution of wealth (or food or mp3 players).//   

       I define wealth by getting work done that... people want done. Lack of distribution is something to do with socialism which is the same thing world leaders are using to "fix the economy".   

       There is plenty of energy in the world but even so the economy is not built on waste or consumption. There is nothing harmed by a house that lasts forever instead of a house that must be built every 50 years. there is no given contradiction in conservation and wealth. The two have had a long history together.   

       The financial risks of tastes changing are practically 0 compared to the risks of government interferance. The risk of new information regarding health of hamburgers is high but I think we all see the results already. Got to go
MercuryNotMars, Feb 13 2009
  

       Ecomomics is more closely related to biology than it is to physics. In phisics we think of factors internal to the system. In thermodynamics, in particular, there are no external factors. Economic systems are constantly acted on by external facors. Measuring unpredictability and constructing systems of study and taxonomy that treat economic questions the same way that we treat questions about ecosystems and the origin of species is far more effective than sysems that attempt to constrain economics into a mathematic format. This idea will fail because economies do not follow internal rules, they evolve to fit the unpredictable system in which they exist. As a final note I disagree that a novel law is needed to describe situations that do not perfectly fit the second law. The second law describes a tendency that would not be descernable if it were not constantly being defeated by chaotic behavior in living an non-living systems. A addendum describing that, in any given system, there exists a measurable degree of resistance to the second law could be helpfull (no system defeats the second law, systems can only reduce it.)
WcW, Feb 13 2009
  

       sorry about that, i really disagree with the idea that we can understand the economy in terms of "speed" "mass" "momentum" "energy" and build gauges and measures around these concepts that, when looked at alone, give you no information. You cannot distill the function of an economic system to a single number and pretend that has any meaning. Fools, with numbers, where angels dare to tread.
WcW, Feb 14 2009
  

       I don't think anyone is trying to force economics into classical mechanics.   

       //you cannot formulate a complete set of laws without looking at the whole system//   

       I'll give you that it might be a bit hard to set up experiments and take measurements Isolateing variable. You can do a lot with equivalancies. You can do a lot with the question: What would I do in this situation.   

       By definition the market determines price and value. By definition value motivates work dirrection(thinking about value being created and destroyed thing, that needs some definition, I am not there yet). By definition supply is the supplier's demand for other products. Supply and demand cannot be decoupled. Work motivated by market demand is value. Markets motivated without supply distorts value. Distorted value wastes work.   

       I work with the whole system. You really can see it all if you look.
MercuryNotMars, Feb 14 2009
  

       Jesus, Mercury, I think I see It.
daseva, Feb 14 2009
  

       Biology is still about thermodynamics though. It's hard to have a serpentine endomorph because they'd lose too much heat and smaller animals have to be ectomorphs. Amphibia have to be fairly small because gas exchange occurs across their skin and since they have to be small they have shorter digestive systems and are usually carnivorous. Ecology and physiology are all about the flow of energy. I can see economics as a form of ecology, certainly, but that would make it thermodynamic.   

       The big difference would probably be linked to the extent to which economics is conducted rationally. Common sense tells us lots of things which aren't true, and those might show up in these circumstances.
nineteenthly, Feb 14 2009
  

       Trying to draw a line between physics as somehow 'mathematical' and biology or economics as not seems a little confused.   

       Physics contains its own stochastic mathematics already - the gas laws, the entirety of quantum physics - even thermodynamics itself - nobody stood up and said that these things were just too hairy to apply mathematical rigour to them - what is it about a network of interactions that's so different from say, the gas laws? Or a cloud of electrons who's probability functions interfere with one another? Instead, they picket out the important bits and created a smoothed-out approximation of the chaos that was going on underneath - what's wrong with doing the same thing elsewhere?   

       To try to say NO to defining the constants, properties and laws that define economic activity because it's 'not mathematical enough' is to limit the possibilities of mathematics. Nobody said it was going to be easy - but there is a process there, and I personally don't see any reason why it shouldn't be followed.   

       And no, it wont ever explain why Billy Timpkins spends his last 10p on a sherbert dip - but then neither will PV=nRT explain how a particular gas molecule finds its way into a particular location - that's not to say it can't be done - it just using a different branch of mathematics.
zen_tom, Feb 14 2009
  

       In a way, economics is central to mathematics. I can't be sure, but i think the concept of negative numbers and exponentiation were discovered as a result of financial transactions.
I would say that the law of diminishing returns is illustrated when certain predators give up on chasing prey because the energy they derive from them is less than that expended. I can't think of another example off-hand, mainly due to knowing very little of economics, but i would expect there to be others which could be transferred.
nineteenthly, Feb 14 2009
  

       ahh, the illusion of understanding. Does the simple knowledge that sometimes the predator calls off the chase give you the ability to predict when that will happen? We may know how far the wolf can run, how far it usually runs, etc., but we cannot see the gopher hole that will break the wolf's leg. The economy is like this, only a thousand fold more, with hundreds of different undiscovered unknowns multiplied by thousands of trials. Sometimes both the wolf and the rabbit are burned to death in a grass fire, sometimes the wolf and the rabbit both starve. "The Economy" is just a count of wolves and rabbits, a simple statistic, laid over a system as complicated as they come. If you think that this can be treated as a "closed" (!) system then you need your head examined, it is no more a closed system than the raw sports scores. I don't even think that theorists believe that the economy can be studied as a purely predictable system, book titles aside.
WcW, Feb 14 2009
  

       I can see a mechanism which causes a wolf to give up chasing a rabbit, namely a series of relentless ancestors who starved to death or died of exhaustion chasing prey relentlessly until some combination of inherited characteristics was passed on which prevented that. I suppose memes might determine that in the case of economics, but i'm wondering if it can evolve in the same way. I know there are people out there who say a free market economy is a naturally evolved system. I don't know about that, but i do know there's an art to making a profit which i lack knowledge of.   

       Just as any other craft could develop over a long time, for instance metal-working going through the bronze and the iron ages or the use of a new kind of harness for horses allowing the cultivation of a larger land area, the craft of making a profit as such could do the same, and that could happen in evolutionary terms rather than through research.
nineteenthly, Feb 14 2009
  

       [WcW] I take your point - but does a thing being difficult mean it can't be studied, and common laws can't be postulated, isolated and proven? Do we have to give up on quantum mechanics and meteorology as well?
zen_tom, Feb 14 2009
  

       After some reflection, doesn't this start to sound a little like Asimovian psychohistory?
nineteenthly, Feb 14 2009
  

       Its a plant Jim   

       I think I read an essay at new scientist critiqueing economics said that it became a science as a result of what has been called "physics lust" the desire to explain n predict with the awesome power of Newtonian accuracy codified with written mathematics   

       anyway some early economists just bolted thermo equations to words like supply or demand then added adjustor variables so actual printable publishable equations could represent any data time series as a graph with predictable areas then human minds could have fun stacking these n talking about how these colinearities might affect each other   

       economic science purpose is variously prediction or steering or, rather sadly, generating straw arguments to support a preexisting opinion (if we give them/take their money economics says they'll just _______)   

       I think a newish (like um 1980's on) mathematics based on neural network chunks might be better at the ultimate economic purpose of prediction plus steering   

       If each neural network chunk represented a finitely describable area of state spaces (big if) which could be represented as math functions with nicely passable arguments kind of like object oriented programming handles on neural network chunks Then have the chunks learn to mimic the actual data (what actual economic data is is highly variable plus subject to study) the mechanism could create equations that describe plus predict what objects plus money plus liquidity plus absorption factors like demand or rust or obsolescence actually would do with certain start plus ongoing maintenance variables   

       I heard there was a million dollar prize to figure out percolation theory which is kind of similar to absorption factors like demand or rust or obsolescence actually would do with certain start plus ongoing maintenance variables   

       more pragmatically I think there are different ideas like steer from the middle or great people make great companies   

       steering from the middle is where there is a big sprawling thing like an economy that a person might change varying money supply   

       great people make great companies is where if you have lots of discete persons causing a system with systemic character then change the persons to save, spend, build, communicate, or transfer more to change the systemic entireity A less imposing way to say this is If everyone gave more gifts or if everyone decided poverty was lacking relevance or if everyone started a company or if everyone were three times cleverer than me (which they might be, but are hiding this) then economics would be wildly different plus have a different name like partial state space psychogeoenergetics   

       passable
beanangel, Feb 14 2009
  

       Amen [tom zen]. I don't think unpredictable means it is not modelable. It is purely mathematical and scientific to say that no program can be created to test whether a program will halt or infinitly continue without resolution. I understand there is a uncertainty principle in physics named after a very famous man(I am not sure if it is as rigourous). Unknowns don't make or unmake hard sciences.   

       The knowledge of what you can and cannot predict is what makes it a science.
MercuryNotMars, Feb 15 2009
  

       Right, and there's nothing here that's suggesting prediction, except perhaps in a very long-term, high-level view - same as thermodynamics predicts, over time, trends in terms of energy and entropy. Nothing in thermodynamics predicts the paths that fundamental particles take while they are busy exchanging energy - and nothing in this idea suggests that predictions will be made about individuals and their payment habits. Two separate instances of things that, at a close-up, micro view follow one set of behaviours, yet, when the sum of their behaviours is viewed in summation and viewed from a distance, conforms to nice simple laws.   

       So let's not have the straw man of some things not being predictable - we know that's true - but it doesn't apply here - if it looks too chaotic, then you're too close - take a step out and look at it from further away.   

       And [nineteenthly] yes it does doesn't it!
zen_tom, Feb 15 2009
  

       [beanangel], that's an epistemological issue and interesting. Thanks for that. Part of my frustration with the humanities and social studies (sciences?) is the domination by critical theory and poststructuralism. Economics has, so far as i know, at least avoided that. I don't generally believe in people being "great". On the whole, in the sciences and large scale politics, individuals happen to be in the right situation at a particular time. There can only be one Jane Austen, but there could be as many George IIIs as you like, in the sense of "British monarch who lost the American colonies", because it was time for them to be lost. There might even be some necessity in a George III who went mad due to a combination of inbreeding and a personal life crisis precipitated by losing the colonies. Great people who are irreplaceable in history are rare, i think. In the realm of economics, Gary Kildall is dead, but couldn't he have been Bill Gates?
It just occurred to me that talking about George III in this way is non-Asimovian psychohistory.
[MercuryNotMars], i think it's probably deterministic rather than irreducibly uncertain, but also that it is sometimes chaotic.
[zen_tom], interesting contrast between those two paragraphs! It would probably have to be about large scale and long term predictions, and demarcation between the predictable and the unpredictable is also important. What gets me with what you said, though, is that Asimovian psychohistory _is_ about prediction. Seldon was supposed to map out the next millenium of Galactic history, though of course <SPOILER> that wasn't how things worked out later due to a "great man".
nineteenthly, Feb 15 2009
  

       Assumptions are great as long as they work. History is littered with economic failures build on well examined, well calculated, theoretically correct, assumptions. Here, like in eugenics, genetic engineering, nuclear power, scientific research and "educated" decision making can lead to terrible human consequences. If we fool ourselves into believing that we can control the economy we might take terrible risks, thinking that we have the downside on a leash (this has happened in the past). NO to dogmatic economic theologies of all flavors!
WcW, Feb 15 2009
  

       To an extent, economics is more like astronomy than physics, because experiments can't be done in the same way, but just as astronomy is largely based on physics, economics can be based on something else which would be testable, but what that would be, i don't know.
nineteenthly, Feb 16 2009
  

       Economics and entropy have very little that could map together. Economics is fixed to a limited supply and variable demand, entropy always increases.
RayfordSteele, Feb 18 2009
  

       Right now, we're a lot closer to merging taxidermy and economics.
jutta, Feb 18 2009
  

       Oh, i see, the link being inflation?
nineteenthly, Feb 18 2009
  

       I can see it now, heads of state assemble to hear the great leader's words, hush descends as the one last great hope for the economy steps up to the podium and addresses the audience,
"'e's not dead, e's pinin' for the fjords!"
zen_tom, Feb 19 2009
  

       //History is littered with economic failures build on well examined, well calculated, theoretically correct, assumptions//

Long Term Capital Management was a classic example of this. LTCM was a hedge fund company that employed a number of accomplished mathematicians to create a model of the market. They then used the model to guide their investment strategy...and crashed spectacularly (linky).
DrBob, Feb 19 2009
  

       And that's a really good example of the way this idea (as far as I see it) has been misunderstood.   

       If you were to draw an analogy between LTCM and, say the gas-laws, LTCM would be a particular molecular process that was attempting to behave like a Maxwell's Demon, doing something at the micro level, while the sum total of it, and all around it, can be described in terms of a supermacro level set of laws. It's just a matter of scale. Same as Classical and Quantum physics - the fact that one is nuts doesn't mean the other isn't possible because lots of the wildness smooths out when you look at it from far enough away. Sadly this means that discovering the laws isn't going to help anyone make any money, until such time as you can transcend from the micro-level and actually control things at the macro level - but you'd have to be a galactic overlord to be in that position, at which point the rewards are no longer important.
zen_tom, Feb 19 2009
  

       Isn't being Galactic Overlord it's own reward?

I take your point, z_t, about micro versus macro scale but my objection to the idea isn't so much about prediction or modeling (which are certainly possible - people are doing it every day, some less successfully than others) but about the whole concept of economics as a "hard" science.

Much of what has been written in the annos above hangs off of the concept of markets & money, supply & demand etc. But these are concepts which have been framed by our own historical development. Trying to give these concepts the status of physical laws strikes me as more of a propaganda exercise than a scientific one. However, if you really pushed me to propose one simple law of economics then it would be the one that everybody knows already. Money makes money.

Talking of science, I would also take issue slightly with MercuryNotMars' defence of the subject. Whilst I agree with the concept & application of scientific method, there are many things which science has not yet explained. If that wasn't the case then there would be no reason for any further scientific research. That's not to deny that science may eventually provide us with all the answers (the day after that happens will be pretty dull mind) but it certainly hasn't done so yet.
DrBob, Feb 19 2009
  

       Agreed, the bit that excites me though is - and this comes through my agreement with your criticism of loosely defined terms such as money, market, supply etc being more propaganda than science - what's required is is a fundamental review of what it is that's going on.   

       In order to begin that review you have to have a starting point - and the existing Laws of Thermodynamics seem to be a reasonable foundation.   

       The problem with those laws though is that they just don't account *whatsoever* for the phenomena of self-organisation, undirected evolution and the emergence of complexity, and the tendency for these things to create (a form of rather messy-looking) order, and lots of it. That's an important process - and one that's currently being completely overlooked by the fundamental physical sciences.   

       If you were to encapsulate the general properties of what makes those things happen, I think the fundamentals would suggest that *replicators* (anything from self-catylising reactions, amoebas, finches to people and nation states) who utilise energy and material *resources* to both replicate, and also in furthering their offspring's ability to replicate more effectively through *adaptation* mechanisms - both of those things can be described in non-intentional, mathematical terms - once you've been able to define and measure the units of replication, adaptation and resource consumption - no mean feat, but certainly easier at the lower levels of complexity than at what we would call "Economics" today (but nevertheless, the same thing).   

       These same (additional thermodynamic) laws should apply equally well at the level of a bowl of primordial soup, or to the fluctuation of isolated populations of grass, rabbits and foxes, as they might in a complex and rapidly changing corporate global economy; and in doing so, explain how this miracle of constant, ever increasingly intricate (there's got to be a better way of saying that) phenomena in thermodynamic terms - because, and here's the clincher - it's all made from the same thermodynamic stuff as everything else - how can it all behave so differently?   

       Without these additional laws, there's a gaping hole in thermodynamics which just doesn't explain what makes up more than 99% of our (albeit non-representative in cosmic terms) daily experience.
zen_tom, Feb 19 2009
  

       This might sound somewhat pseudoscientific, but it looks to me that LTCM works as a test case for a particular theory, so yes, it's like Maxwell's Demon. However, it would still be possible to make some money out of knowing the laws, as an economics professor.
[DrBob], there's a lot of potential for rhetoric around this, and i suppose i think several things about it. One is that whereas specific historical circumstances gave rise to what we think of as our current economic system, the same is true of a lot of other things which can still be understood scientifically. For instance, we use internal combustion engines but we could have had another system, though their existence has made particular scientific principles more important to us than others.
  

       Besides that, though, i do think there's potentially a lot more going on than money being exchanged for goods and services, and there does seem to be a lot of propaganda value in that. I keep thinking of the exchange ring in Papua, with goods moving in both directions. None of them are actually money and it's based on prestige, so the notion of value there is not the same as price. I think that's fruitful but i can't get much further.
Having said that, i can maybe offer a non-exhaustive list of the kind of things which could count as economic transactions in a sense:
1) Exchanging money for goods or services. As i've said elsewhere, this isn't clearcut because there are other things involved in the transaction, such as social interaction and, say for food, dietary tabus.
2) Barter, which depends on both parties wanting what the other one offers.
3) LETS, which replaces the exchange with another system and is similar to money in many ways, except that it can't become capital and is not freely exchangeable.
4) Payment in kind. The likes of peasants or conquered people giving some of their crops as tribute or instead of tax.
5) Gifts. The exchange of goods for prestige and goodwill maybe? It happens at birthdays and the like but also between nations in diplomacy, like the Chinese giving other nations pandas.
6) The kula ring system, and probably a load of other stuff. The exchange of objects of beauty, so a different kind of value there, for other objects of beauty in a prescribed way, so in a way each exchange is a very specific currency conversion but also involves prestige.
7) Potlatch, which totally does my head in but seems to link a spiritual dimension to economic exchange or something.
Moreover, people have analysed personal relationships in these terms. You might see a long term sexual relationship with cohabitation as being based on give and take in the same way, and if there's not enough on one side, divorce may ensue. Same with friendship. That all sounds a bit calculating and bleak, but i'd prefer to look at it the other way - extend the touchy-feely stuff, or maybe the mutual respect stuff, into the realm of economics and see what you get.
  

       Whoops, forgot to mention this:   

       8) Freecycle. Large amounts of stuff people don't want being given away to people who do want it, so it has a positive value on one side and a negative one on the other.
nineteenthly, Feb 19 2009
  

       //ever increasingly intricate//

I think “ever more complex” is the term that you are grasping for!

nineteenthly, your proposition that //economics can be based on something else which would be testable// hints at my difficulties with this idea. We only have human history as a test case and, as z_t says, that’s hardly a representative sample in the cosmological scale of things. Unlike with physics & astronomy we don’t have access to any data from the rest of the universe. So, in the end, this idea is not so much like Asimov’s ‘psychohistory’ but more like trying to implement Douglas Adams’ theory that the whole of creation can be extrapolated from a small piece of fairy cake. The ‘thermodynamics’ route seems to be a more promising direction to follow in that case!
DrBob, Feb 19 2009
  

       Yep, good point. The thing is, something i forgot, the discourse of economics is odd. Empirical science is one thing, dominated by logos. Social "studies" and the humanities have the likes of poststructuralism, which is nasty and crap but provides a framework. Economics doesn't seem to be like either. Whereas you could see sociology or politics in terms of the whole signifier thang, and, say, biology as ultimately supervening on fitness and physics, and even psychology as at least having qualitative and quantitative methodologies, economics isn't like that. It's not natural science, it doesn't subscribe to the usual methodologies or theories of social science (nomenclature problem there), so what exactly is it? Whereas i'm pretty pissed off with critical theory, it does at least unify social studies and the humanities to some extent, as does the scientific method, economics doesn't seem to have any of that at all. What's that about?
nineteenthly, Feb 19 2009
  

       Ha! It's funny that you should end your anno with that particular remark. In the first draft of my last anno I was going to make reference to the Michael Caine line in the film 'Alfie'. "What's it all about then, eh?".

In the case of Economics, I think that it is just a suite of models, each of which attempt to describe (or generalise about) specific aspects of commercial interaction. My own view is that this is fine, as far as it goes as there is at least some empirical data to work with there, but that it is probably futile to try and combine these models into a single, overarching 'Unified Theory' even in the case of modern humans, let alone for the whole of creation. That shouldn't stop you trying though. Lots of people make a good living at it!
DrBob, Feb 19 2009
  

       [marked-for-tagline] // Yes, i know it's all a bit squishy but i'm in a hurry. // as the bishop said to the chorus girl
BunsenHoneydew, Feb 23 2009
  

       and the next youtube scam will be for a perpetuum moneyle machine
pashute, Jul 01 2013
  
      
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