IDEAS home Printed from
   My bibliography  Save this article

From physics to economics: An econometric example using maximum relative entropy


  • Giffin, Adom


Econophysics, is based on the premise that some ideas and methods from physics can be applied to economic situations. We intend to show in this paper how a physics concept such as entropy can be applied to an economic problem. In so doing, we demonstrate how information in the form of observable data and moment constraints are introduced into the method of Maximum relative Entropy (MrE). A general example of updating with data and moments is shown. Two specific econometric examples are solved in detail which can then be used as templates for real world problems. A numerical example is compared to a large deviation solution which illustrates some of the advantages of the MrE method.

Suggested Citation

  • Giffin, Adom, 2009. "From physics to economics: An econometric example using maximum relative entropy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(8), pages 1610-1620.
  • Handle: RePEc:eee:phsmap:v:388:y:2009:i:8:p:1610-1620
    DOI: 10.1016/j.physa.2008.12.066

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

    File URL:
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item

    As the access to this document is restricted, you may want to search for a different version of it.


    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Schools of Economic Thought, Epistemology of Economics > Heterodox Approaches > Thermoeconomics


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Secrest, J.A. & Conroy, J.M. & Miller, H.G., 2020. "A unified view of transport equations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 547(C).
    2. Zhou, Daoqing & He, Jingjing & Du, Yi-Mu & Sun, C.P. & Guan, Xuefei, 2021. "Probabilistic information fusion with point, moment and interval data in reliability assessment," Reliability Engineering and System Safety, Elsevier, vol. 213(C).
    3. Giffin, Adom & Cafaro, Carlo & Ali, Sean Alan, 2016. "Application of the maximum relative entropy method to the physics of ferromagnetic materials," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 455(C), pages 11-26.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:388:y:2009:i:8:p:1610-1620. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.