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Predicting agents' direction of change in a non-stochastic economy using a potential function

Author

Listed:
  • Takuma Tanaka

    (Graduate School of Data Science, Shiga University)

Abstract

This study examines an optimal agent producing a consumption good and depreciating capital and trading capital without depreciation. Assuming that the prices of the depreciating capital are fixed and that the future prices of undepreciated capital are announced, this study demonstrates that the agent never loses profit on trading undepreciated capital if the agent's state converges to the initial state. Corollary to this result, we found a scalar potential that predicts the change direction of agents trading the undepreciated capital exclusively among them. The similarity between the scalar potential and the Helmholtz free energy suggests that stochastic economic models could be characterized by a framework similar to information thermodynamics.

Suggested Citation

  • Takuma Tanaka, 2022. "Predicting agents' direction of change in a non-stochastic economy using a potential function," Economics Bulletin, AccessEcon, vol. 42(2), pages 603-608.
    • Handle: RePEc:ebl:ecbull:eb-21-01086
    as

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    References listed on IDEAS

    as
    1. Ljungqvist, Lars & Sargent, Thomas J., 2012. "Recursive Macroeconomic Theory, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262018748, April.
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    More about this item

    Keywords

    Non-stochastic model; intertemporal choice; capital; planning;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D1 - Microeconomics - - Household Behavior

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