radon1 wrote:Whatever wrote:Here is the introduction to their formal paper:
Fail. They make no effort to prove that their model does apply to real economies. They simply take a "system", postulate axiomatically that their approach applies to this "system", and then refer to this "system" as to an "economy" and produce their mind games (basically copy-pasting some physics/statistics paper):2. Economy as an Energy Transduction System
According to our naturalistic approach, an economy is an energy transduction system. To describe its characteristics and evolution in a self-similar manner using the statistical physics of open systems, all entities of the system are regarded as systems themselves (Figure 1). Each entity is associated with an energy density that results from its physical production processes.
You could equally take some computer game strategy and deduce that this game's logic applies to real economies by postulating that it does. Great job.
False. Computer game strategy is not based on natural law.
The physicists approach the economy as an Energy Transduction System because that is what it is. They don't have to prove it.
radon1 wrote:The text itself is full of, let's say, meaningless word soup, for all practical purposes. What is "energy density" of an economy? How do you measure it? What is entropy(!) of an economy?
But this was a good illustration of "naturalists".
You obviously do not understand the paper. Do you really think that makes a good argument?
Read this part:
In this study the cross-disciplinary examination of economics is not an end in itself but a consequence of applying the universal natural law of energy dispersal. Economic systems are not described as mimicking biological systems but both are seen to be manifestations of the ubiquitous natural law that is equally valid also for chemical and physical systems. Admittedly, the principle of increasing entropy seems technically trivial in its mathematical form but its conceptual consistency draws from the principles of hierarchy theory. Self-similarity in energy transduction and dissipative transformations are the key elements that overshadow disciplinary divisions of historical origin.
Traditionally, economic activities are viewed as being motivated because they provide means for human welfare, or simply because they make profit possible. Our definition of economic activity as a means to increase entropy production sums up numerous terms just as does the gross national product (GNP), the familiar measure for all produced goods and services. However, we emphasize that not all and every productivity counts for the economic growth measured by entropy production that turns negative, e.g. due to temporary over production. In a command economy or in a poorly operating market it may take a while before the adverse behaviors are noticed and corrective actions are taken. Indeed, recent studies have revealed that the stability of an economy against incessant endogenous perturbations is compromised when most of its agents are sparsely linked and only a few central hubs have a large number of connections [100,101]. Economic evolution directs naturally toward highly integrated hierarchical systems where statistically independent actions secure maximal flows of energy that rapidly level all accessible gradients of energy. Ensembles of arbitrary actions will be statistically random.
Information deserves no special status in the thermodynamic description of economic activities. Information in its physical representations is a commodity like any other, although its value, measured by entropy increase resulting from instructed actions is often high [40]. Information asymmetry [102] means that informed agents are simply more appropriately equipped with mechanisms than their uninformed counterparts. Adverse selection, e.g., encountered in the principal-agent problem, follows from the subjective nature of decision making that is an inherent characteristic of changing open systems. It is in the interest of the economic system to use various mechanisms, including those that are referred to as rules, traditions and legislation, to promote growth, on the one hand by protecting owner’s rights in accumulating aggregates that are needed to assemble powerful mechanisms, and on the other hand by ensuring that its agents are informed and equipped with adequate mechanisms, e.g. acquired during education.
Utility, that essential but elusive concept, is herein identified with the rate of entropy production; the ultimate but invisible incentive is to disperse energy. Economies evolve by diminishing free energy, equivalent ultimately to increasing entropy, toward more probable distributions of matter under an influx of energy. This reasoning, based on statistical physics, does not undervalue decision making in directing economic activities but allows us to rationalize or framework human behavior.
It is not surprising that a statistical description yields statistical laws and regularities that are characteristic of diverse economic systems, but it is intriguing that the same theory also provides insight into the decision making by individual agents. The self-similar hierarchical formalism considers an individual as a system of its own whose decision making results from a natural process eventually driven by many, and even conflicting, forces. This naturalized view of economic activity, however, does not deny the concept of free will but realizes that it is constrained by bearing free energy configurations.
Economists cannot make accurate forecasts. This paper shows why.
radon1 wrote:You come across as amateurish.
No, you do.
radon1 wrote:You probably don't, see above.
I do see above you. *WAY* over your head.
Never mind.
---Futilitist
