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Econophysics, Entropy, and Complexity

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Abstract

The term econophysics was neologized in 1995 at the second Statphys-Kolkata conference in Kolkata (formerly Calcutta), India by the physicist H. Eugene Stanley, who was also the first to use it in print (Stanley 1996). Mantegna and Stanley (2000, pp. viii–ix) define “the multidisciplinary field of econophysics” as “a neologism that denotes the activities of physicists who are working on economics problems to test a variety of new conceptual approaches deriving from the physical sciences” Chakrabarti 2005, p. 225).

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Notes

  1. 1.

    While most financial economic modeling done by econophysicists has drawn on models derived from statistical mechanics, a rival has been models based on geophysical earthquake models (Sornette, 2003). See also Rosser Jr. (2008b).

  2. 2.

    For a more complete discussion of the relations between econophysics, econochemistry, and econobiology within the transdisciplinary perpective, see Rosser Jr. (2010b).

  3. 3.

    See Rosser Jr. (2016a) for further discussion of the development of the ergodic hypothesis and its relationship to economics. Rosser Jr. (2016b) considers the role of entropy in econophysics in more detail.

  4. 4.

    We note that there are now a variety of extensions of the more basic Boltzmann-Gibbs and Shannon versions of entropy, including Renyi (1961), and Tsallis (1988) (this latter more closely tied to the study of power law distributions), with various efforts at generalizing these being made such as by Thurner and Hanel (2012). However, we shall not focus on these and note that most of these reduce to the simpler forms asymptotically as certain modifying parameters approach infinity, even as we recognize that they may well be useful for future applications. See Rosser Jr. (2016b) for further discussion.

  5. 5.

    Georgescu-Roegen (1971) in particular strongly relied on the argument of Schrōdinger (1945, Chap. 6) regarding how life is ultimately an anti-entropic process based on organisms being open systems able to draw in both matter and energy while they live, with in this sense the death of organisms representing the ultimate victory of entropy. An alternative is to more directly follow Carnot and Clausius in emphasizing the role of the steam engine in the modern economy as in Cockshott et al. 2009).

  6. 6.

    The law of diminishing (marginal) returns or productivity is probably the only so-called “law” in economics for which no counterexample has been found.

  7. 7.

    Rosser Jr. (2008a) provides further discussion of this debate.

  8. 8.

    Herodotus described a marriage auction in Babylon with descending prices for potential brides. The most desirable would go for positive prices, but the auction allowed for negative prices for the least desirable potential brides. This contrasts with most societies where there is either a positive bride price or a positive groom price, more often described as a “dowry.” The problem of negative prices is often obfuscated by declaring two separate markets, such as one to supply water when it is scarce and a different one to remove it when it is flooding. But the Babylonian bride market described by Herodotus makes it clear that there can be unified markets with both positive and negative prices.

  9. 9.

    See Rosser Jr. (2020c) for further discussion.

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    J. Barkley Rosser Jr.

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Rosser, J.B. (2021). Econophysics, Entropy, and Complexity. In: Foundations and Applications of Complexity Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-70668-5_4

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