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Maximum entropy economics

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Abstract

A coherent statistical methodology is necessary for analyzing and understanding complex economic systems characterized by large degrees of freedom with non-trivial patterns of interaction and aggregation across individual components. Such a methodology was arguably present in Classical Political Economy, but was abandoned in the late nineteenth century with a theoretical turn towards a purely mechanical approach to understanding social and economic phenomena. Recent advances in economic theory that draw from information theory and statistical mechanics offers a compelling statistically based approach to understanding economic systems based on a general principle of maximum entropy for doing inference. We offer a brief overview of what we consider the state of maximum entropy reasoning in economic research.

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Authors and Affiliations

  1. University of Utah, Salt Lake City, UT, USA

    Ellis Scharfenaker

  2. University of Oxford, Oxford, UK

    Jangho Yang

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  1. Ellis Scharfenaker
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  2. Jangho Yang
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Correspondence to Ellis Scharfenaker.

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Scharfenaker, E., Yang, J. Maximum entropy economics. Eur. Phys. J. Spec. Top. 229, 1577–1590 (2020). https://doi.org/10.1140/epjst/e2020-000029-4

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