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Equilibrium econophysics: A unified formalism for neoclassical economics and equilibrium thermodynamics

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  • Sousa, Tânia
  • Domingos, Tiago

Abstract

We develop a unified conceptual and mathematical structure for equilibrium econophysics, i.e., the use of concepts and tools of equilibrium thermodynamics in neoclassical microeconomics and vice versa. Within this conceptual structure the results obtained in microeconomic theory are: (1) the definition of irreversibility in economic behavior; (2) the clarification that the Engel curve and the offer curve are not descriptions of real processes dictated by the maximization of utility at constant endowment; (3) the derivation of a relation between elasticities proving that economic elasticities are not all independent; (4) the proof that Giffen goods do not exist in a stable equilibrium; (5) the derivation that ‘economic integrability’ is equivalent to the generalized Le Chatelier principle and (6) the definition of a first order phase transition, i.e., a transition between separate points in the utility function. In thermodynamics the results obtained are: (1) a relation between the non-dimensional isothermal and adiabatic compressibilities and the increase or decrease in the thermodynamic potentials; (2) the distinction between mathematical integrability and optimization behavior and (3) the generalization of the Clapeyron equation.

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  • Sousa, Tânia & Domingos, Tiago, 2006. "Equilibrium econophysics: A unified formalism for neoclassical economics and equilibrium thermodynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 371(2), pages 492-512.
    • Handle: RePEc:eee:phsmap:v:371:y:2006:i:2:p:492-512
    DOI: 10.1016/j.physa.2006.04.058
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