Conservation laws, financial entropy and the eurozone crisis
AbstractThe 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 InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2013-36.
Date of creation: 2013
Date of revision:
entropy; conservation-law; financial crisis;
Other versions of this item:
- Cockshott, Paul & Zachariah, David, 2014. "Conservation laws, financial entropy and the Eurozone crisis," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 8(5), pages 1-55.
- Paul Cockshott & David Zachariah, 2013. "Conservation laws, financial entropy and the Eurozone crisis," Papers 1301.5974, arXiv.org.
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-EEC-2013-07-28 (European Economics)
- NEP-MON-2013-07-28 (Monetary Economics)
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