Working Paper Article Version 1 This version is not peer-reviewed

Elementary Principles in Statistical Economics

Version 1 : Received: 10 October 2020 / Approved: 12 October 2020 / Online: 12 October 2020 (12:21:04 CEST)

How to cite: Abel, C. Elementary Principles in Statistical Economics. Preprints 2020, 2020100237 Abel, C. Elementary Principles in Statistical Economics. Preprints 2020, 2020100237

Abstract

Economics has long sought to bridge the principles of microeconomics into the realm of macroeconomics. This paper presents a formal attempt to do so by using a maximum entropy based approach derived from statistical mechanics coupled with subjective game theory and elements from political philosophy. This approach is then applied to income distributions and to the Cobb-Douglas production function, to create a framework for future applications, and to illustrate where past work had made implicit assumptions regarding the system. The paper then explores the consequences of the approach, illustrating self-contradictions in the political philosophy of distributive justice, formally deriving an equation of state for the transactions on the Bitcoin network, and deriving from this the ideal gas law and polytropic process for an economy proving that expansionary monetary policy is extractive – not stimulative.

Supplementary and Associated Material

https://github.com/crabel99/incomeDist: Code and data used in development

Subject Areas

statistical mechanics; information theory; game theory; subjective utility; entropy; income inequality; distributive justice; monetary policy

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