Can Entropy Theory Explain Economic Systems?

  • Thread starter Steven Vincent
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In summary, entropy theory posits that economic systems are inherently chaotic and unpredictable due to their complex and interconnected nature. This theory suggests that the constant flow of energy and resources through an economic system leads to a gradual decline in order and organization, ultimately resulting in economic crises and fluctuations. However, critics argue that while entropy theory may offer valuable insights into the dynamics of economic systems, it cannot fully explain the complexities and nuances of human behavior and decision-making in the economy. Ultimately, the applicability of entropy theory in explaining economic systems remains a subject of ongoing debate and research.
  • #1
Steven Vincent
How did you find PF?
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Hi. I'm an economist working on a generalized physical theory of entropy to be applied to economic systems. This would fall under the general rubric of Systems Theory, Emergence Theory, Self-organization and Social Entropy Theory. I blog on the financial system/markets at [link deleted by the Mentors]
 
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  • #2
This subject reminds me of this post I made a while ago about Cesar Hidalgo’s 2015 book: “Why Information Grows”.
Interesting stuff to me anyway.
 
  • #3
Thanks. I read the blurb on Amazon and I got the impression he was looking at Information in the Stiglitz way as an economic product/asset/entity rather than the Shannon Entropy way, which is what I am really interested in. Is that correct?
 
  • #4
Could be. Not sure what Stiglitz way is, but the Shannon way.
The argument is an accumulation of complexity able to generate a greater more and different products.
I think he consults on economic development.
My personal interest is in its application to biology.
 
  • #5
Steven Vincent said:
How did you find PF?: google

Hi. I'm an economist working on a generalized physical theory of entropy to be applied to economic systems. This would fall under the general rubric of Systems Theory, Emergence Theory, Self-organization and Social Entropy Theory. I blog on the financial system/markets at [link deleted by the Mentors]
Welcome to PhysicsForums. We look forward to reading your papers when they've been published -- they will be great thread starters. :smile:

This thread here is just for brief introductions, so to start a more detailed discussion, please start a thread in the main technical forums. Thanks.
 
  • #6
BillTre said:
Could be. Not sure what Stiglitz way is, but the Shannon way.
The argument is an accumulation of complexity able to generate a greater more and different products.
I think he consults on economic development.
My personal interest is in its application to biology.

Yeah I read some of the reviews and they indicate he is taking more of a Shannon/Information Theoretic/Systems Theory approach to it...which is what I am looking for. Thanks for the tip!
 
  • #7
OK. I'm no entropy expert, but find it interesting.
 

Related to Can Entropy Theory Explain Economic Systems?

1. Can entropy theory be applied to economic systems?

Yes, entropy theory can be applied to economic systems. Entropy theory is a universal concept that can be applied to any system, including economic systems. It helps to understand the flow and distribution of energy and resources within an economic system.

2. How does entropy theory explain economic systems?

Entropy theory explains economic systems by examining the flow and distribution of energy and resources within the system. It helps to identify patterns and trends in the system, such as the concentration of wealth and resources, and how they change over time.

3. Can entropy theory predict economic outcomes?

Entropy theory can provide insights and predictions about economic outcomes by analyzing the patterns and trends within the system. However, it is not a deterministic theory and cannot predict specific outcomes with certainty.

4. Are there any limitations to using entropy theory in economics?

Like any theory, entropy theory has its limitations. It is a complex concept that may not be easily applicable to all economic systems. Additionally, it may not account for all factors that influence economic outcomes.

5. How can entropy theory be used to improve economic systems?

Entropy theory can be used to identify inefficiencies and imbalances within economic systems and provide insights for improvement. By understanding the flow and distribution of resources, policymakers and economists can make more informed decisions to promote a more sustainable and equitable economy.

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