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Entropy and equilibrium state of free market models

Entropy and equilibrium state of free market models | Papers | Scoop.it

Many recent models of trade dynamics use the simple idea of wealth exchanges among economic agents in order to obtain a stable or equilibrium distribution of wealth among the agents. In particular, a plain analogy compares the wealth in a society with the energy in a physical system, and the trade between agents to the energy exchange between molecules during collisions. In physical systems, the energy exchange among molecules leads to a state of equipartition of the energy and to an equilibrium situation where the entropy is a maximum. On the other hand, in a large class of exchange models, the system converges to a very unequal condensed state, where one or a few agents concentrate all the wealth of the society while the wide majority of agents shares zero or almost zero fraction of the wealth. So, in those economic systems a minimum entropy state is attained. We propose here an analytical model where we investigate the effects of a particular class of economic exchanges that minimize the entropy. By solving the model we discuss the conditions that can drive the system to a state of minimum entropy, as well as the mechanisms to recover a kind of equipartition of wealth.

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Navigating the Anthropocene: Improving Earth System Governance

Science assessments indicate that human activities are moving several of Earth's sub-systems outside the range of natural variability typical for the previous 500,000 years. Human societies must now change course and steer away from critical tipping points in the Earth system that might lead to rapid and irreversible change. This requires fundamental reorientation and restructuring of national and international institutions toward more effective Earth system governance and planetary stewardship.

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