Thermodynamics of markets

TL;DR

This paper explores the analogy between thermodynamics and economics, deriving laws and parameters that describe markets using thermodynamic concepts and statistical methods.

Contribution

It establishes a formal analogy between thermodynamic and economic parameters, applying thermostatistics to analyze market behavior and fluctuations.

Findings

Thermodynamic laws are applicable to economic systems.

Market parameters can be modeled using partition functions.

Economic fluctuations can be analyzed through thermodynamic formalism.

Abstract

We consider the thermodynamic approach to the description of economic systems and processes. The first and second laws of thermodynamics as applied to economic systems are derived and analyzed. It is shown that there is a deep analogy between the parameters of thermodynamic and economic systems (markets); in particular, each thermodynamic parameter can be associated with a certain economic parameter or indicator. The economic meaning of such primordially thermodynamic concepts as pressure, volume, internal energy, heat, etc. has been established. The thermostatistics of the market is considered. It is shown that, as in conventional thermostatistics, many market parameters, such as price of goods, quantity of goods, etc., as well as their fluctuations can be calculated formally using the partition function of an economic system.