Introduction to Econophysics

Abstract

The future contains terms (V) that are valid at all times, and terms (U) that are presently unknown. In economics, (V) and (U) correspond to ex ante and ex post, in physics to conservative and not conservative, in calculus, to exact and not exact differential forms or to Riemann and Stokes integrals, and to linear or non-linear equations, in statistics to real and probable terms. Apparently, the authors may represent the (V) and (U) structure in economics and physics by calculus, probability theory, by non-linearity, and chaos theory. The present paper applies Stokes integrals to double entry accounting. The resulting laws replace neoclassical theory and correspond to the first and second laws of thermodynamics. Economics and physics have the same structure, leading to the name econophysics. Production is a two level cycle with cheap production, expensive sales, corresponding to the Carnot cycle of a motor with cold air and hot exhaust. In a running motor, efficiency, the difference between hot and cold, becomes always higher. In an economy the gap between rich and poor always rises.