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A natural value unit—Econophysics as arbiter between finance and economics

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  • Defilla, Steivan

Abstract

Foreign exchange markets show that currency units (= accounting or nominal price units) are variables. Technical and economic progress evidences that the consumer baskets (= purchasing power units or real price units) are also variables. In contrast, all physical measurement units are constants and either defined in the SI (=metric) convention or based upon natural constants (= “natural” or Planck units). Econophysics can identify a constant natural value scale or value unit (natural numeraire) based upon Planck energy. In honor of the economist L. Walras, this “Planck value” could be called Walras (Wal), thereby using the SI naming convention. One Wal can be shown to have a physiological and an economic interpretation in that it is equal to the annual minimal real cost of physiological life of a reference person at minimal activity. The price of one Wal in terms of any currency can be estimated by hedonic regression techniques used in inflation measurement (axiometry). This pilot research uses official disaggregated Swiss Producer and Consumer Price Index (PPI and CPI) data and estimates the hedonic Walras price (HWP), quoted in Swiss francs in 2003, and its inverse, the physical purchasing power (PhPP) of the Swiss franc in 2003.

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  • Defilla, Steivan, 2007. "A natural value unit—Econophysics as arbiter between finance and economics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 42-51.
    • Handle: RePEc:eee:phsmap:v:382:y:2007:i:1:p:42-51
    DOI: 10.1016/j.physa.2007.02.066
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    Cited by:

    1. Pirvu Daniela & Barbuceanu Mircea, 2016. "Recent Contributions Of The Statistical Physics In The Research Of Banking, Stock Exchange And Foreign Exchange Markets," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 85-92, April.
    2. Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
    3. Anand Banerjee & Victor M. Yakovenko, 2009. "Universal patterns of inequality," Papers 0912.4898, arXiv.org, revised Apr 2010.

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