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An economic analogy to thermodynamics
1.J. H. Kagel, R. C. Battalio, L. Green, and H. Rachlin, “Consumer demand theory applied to choice behavior of rats,” in Limits to Action: The Allocation of Individual Behavior, edited by J. E. R. Staddon (Academic, New York, 1980). A summary of this work and others may be found in J. H. Kagel, R. C. Battlio, and L. Green, Economic Choice Theory: An Experimental Analysis of Animal Behavior (Cambridge U.P., Cambridge, 1995).
2.H. Theil, Theory and Measurement of Consumer Demand (American Elsevier, New York, 1975), Vol. 1.
3.See the critical discussion of this neoclassical approach in P. Mirowski, More Heat Than Light (Cambridge U.P., Cambridge, 1989).
4.N. Georgescu-Roegen, The Entropy Law and the Economic Process (Harvard U.P., Cambridge, MA, 1971).
5.J. Herniter, An Entropy Model of Brand Purchase Behavior (Marketing Science Institute, Cambridge, MA, 1972).
6.D. F. Batten, Spatial Analysis of Interacting Economies: The Role of Entropy and Information Theory in Spatial-Input Modelling (Kluwer-Nijhoff, Boston, 1983).
7.D. K. Foley, “A statistical equilibrium theory of markets,” J. Econ. Theory 62, 321–345 (1994).
8.In discussing utility, the expression “psychological utility” is employed by the classic text by P. Samuelson, Economics (McGraw–Hill, New York, 1970), 8th ed., p. 410. It is not obvious how to measure utility, but it is believed that relative measures of utility have meaning. For some purposes economists take a cautious position on utility, treating it as being subject only to priority-ordering (ordinal values). For other purposes economists make the leap of faith that utility can be given a dollar value, so that more quantitative theories can be constructed.
9.See p. 417 of Ref. 8.
10.E. Silberberg, The Structure of Economics: A Mathematical Analysis (McGraw–Hill, New York, 1990), p. 396.
11.E. K. Browning and J. M. Browning, Microeconomic Theory and Applications (HarperCollins, New York, 1992), 4th ed., p. 87.
12.W. Benton, Encyclopedia Brittanica (Chicago, 1966), Vol. 22, p. 92.
13.H. B. Callen, Thermodynamics and an Introduction to Thermostatics (Wiley, New York, 1985).
14.Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, published in Dublin, printed for Messrs. Whitestone and others (1776). This work can be found at http://www.bibliomania.com/NonFiction/Smith/Wealth. See Chapter IV, “Of the Origin and Use of Money.”
15.Some economies employ large rocks as currency; others employ cows; others gold; others paper. Clearly, the cost of money is not an invariant. Moreover, gold had a tendency to become debased. Complex printed notes are subject to the debasement known as counterfeiting. One can imagine that there has been debasement associated with cows and large rocks. Clearly, the formalism, as in Eq. (39), must permit the value of currency λ to vary.
16.W. E. Diewert, “Generalized Slutsky conditions for aggregate consumer demand functions,” J. Econ. Theory 15, 353–362 (1977).
17.A. Barten, “Evidence on the Slutsky conditions for demand equations,” Rev. Econ. Statistics 49, 77–84 (1967).
18.L. D. Landau and E. M. Lifshitz, Statistical Physics (Addison–Wesley, Reading, MA, 1969), 2nd ed.
19.See p. 301 of Ref. 10.
20.B. B. Mandelbrot, Fractals and Scaling in Finance: Discontinuity, Concentration, Risk (Springer-Verlag, New York, 1997).
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