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Conservation laws, financial entropy and the eurozone crisis

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  • Cockshott, Paul
  • Zachariah, David

Abstract

The article 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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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2013-36.

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Date of creation: 2013
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Handle: RePEc:zbw:ifwedp:201336

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Keywords: entropy; conservation-law; financial crisis;

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  1. Engelbert Stockhammer & Erik Klär, 2008. "Capital Accumulation, Labour Market Institutions, and Unemployment in the Medium Run," Discussion Papers of DIW Berlin 834, DIW Berlin, German Institute for Economic Research.
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  4. Lefteris Tsoulfidis, 2002. "Values, prices of production and market prices: some more evidence from the Greek economy," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 26(3), pages 359-369, May.
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  6. Petrovic, Pavle, 1987. "The Deviation of Production Prices from Labour Values: Some Methodology and Empirical Evidence," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 11(3), pages 197-210, September.
  7. 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.
  8. Adrian Dragulescu & Victor M. Yakovenko, 2000. "Statistical mechanics of money," Papers cond-mat/0001432, arXiv.org, revised Aug 2000.
  9. Ian Wright, 2008. "The Emergence of the Law of Value in a Dynamic Simple Commodity Economy," Review of Political Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(3), pages 367-391.
  10. Adrian A. Dragulescu & Victor M. Yakovenko, 2002. "Statistical Mechanics of Money, Income, and Wealth: A Short Survey," Papers cond-mat/0211175, arXiv.org.
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