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An entropy theory of value with reflections on the Arrow–Debreu model

Author

Listed:
  • Jing Chen

    (University of Northern British Columbia)

  • James K. Galbraith

    (The University of Texas at Austin)

Abstract

We present a simple mathematical formulation of an entropy theory of value, consistent with evolutionary economics. It is a non-equilibrium theory, logarithmic in form, which explains the roles of monopoly and oligopoly as well as scarcity in determining economic values. It is an objective theory, rooted in physical realities and economic institutions, similar to the information theory developed by Shannon (1948). We compare this theory to the subjective, utility theory of the Arrow–Debreu model, the foundation of general equilibrium economics.

Suggested Citation

  • Jing Chen & James K. Galbraith, 2023. "An entropy theory of value with reflections on the Arrow–Debreu model," Review of Evolutionary Political Economy, Springer, vol. 4(2), pages 221-247, July.
    • Handle: RePEc:spr:revepe:v:4:y:2023:i:2:d:10.1007_s43253-023-00102-0
    DOI: 10.1007/s43253-023-00102-0
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    References listed on IDEAS

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    1. Arrow, Kenneth J, 1974. "General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice," American Economic Review, American Economic Association, vol. 64(3), pages 253-272, June.
    2. Michels, Robert, 1915. "Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number michels1915.
    3. Jing Chen, 2005. "The Physical Foundation of Economics:An Analytical Thermodynamic Theory," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 5819, January.
    4. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635, December.
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