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Conservation laws, financial entropy and the Eurozone crisis

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  • Paul Cockshott
  • David Zachariah

Abstract

The report attempts of apply econophysics concepts to the Eurozone crisis. It starts by examining the idea of conservation laws as applied to market economies. It formulates a measure of financial entropy and gives numerical simulations indicating that this tends to rise. We discuss an analogue for free energy released during this process. The concepts of real and symbolic appropriation are introduced as a means to analyse debt and taxation. We then examine the conflict between the conservation laws that apply to commodity exchange with the exponential growth implied by capital accumulation and how these have necessitated a sequence of evolutionary forms for money, and go on to present a simple stochastic model for the formation of rates of interest and a model for the time evolution of the rate of profit. Finally we apply the conservation law model to examining the Euro Crisis and the European Stability pact, arguing that if the laws we hypothesise actually hold, then the goals of the stability pact are unobtainable.

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File URL: http://arxiv.org/pdf/1301.5974
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Paper provided by arXiv.org in its series Papers with number 1301.5974.

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Date of creation: Jan 2013
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Publication status: Published in Economics: The Open-Access, Open-Assessment E-Journal, Vol. 8, 2014
Handle: RePEc:arx:papers:1301.5974

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  8. Ian Wright, 2004. "The Social Architecture of Capitalism," Papers cond-mat/0401053, arXiv.org, revised Mar 2011.
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  10. Drăgulescu, Adrian & Yakovenko, Victor M., 2001. "Exponential and power-law probability distributions of wealth and income in the United Kingdom and the United States," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 299(1), pages 213-221.
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