3. The Dynamic and Evolutionary Principle.

Markets are complex dynamic systems; all the market agents are in perpetual motion in search of profitable deals with each other for the sale or purchase of goods. Buyers tend to buy as cheaply as possible, and sellers want to obtain the highest possible prices. Mathematically, we can describe this time-dependent dynamic and evolutionary market process as motion in the price – quantity economic space of market agents acting in accordance with objective economic laws. Therefore, this motion has a deterministic character to some extent. This motion can and must be approximately described with the help of equations of motion;

4. The Market-Based Trade Maximization Principle.

On relatively free markets, the buyers and sellers consciously and deliberately enter into transactions of buying and selling with each other, since they make deals only under conditions in which they obtain the portion of profit that suits each of them. It is in no way compulsory that they aspire to maximize their profit in each concluded transaction, since they understand that the transactions can only be mutually beneficial. But they do attempt to increase their profit via the conclusion of a maximally possible quantity of such mutually beneficial transactions. Thus, it is possible to assert that the market as a whole strives for the largest possible volume of trade during the specific period of time. Consequently, we can make the conclusion that market dynamics can approximately be described and even approximate equations of motion for the market agents can be derived in turn by means of applying the market-based trade maximization principle to the whole economic system (more exactly, this principle is system-based).

5. The Uncertainty and Probability Principle.

Uncertainty and probability are essential parts of human action in markets. This is caused by the nature of human reasoning, as well as the fundamental human inability to accurately predict a future state of the markets. Furthermore, market outcome is the result of the actions of multiple agents, and no market is ever completely closed and free. For these reasons, all market processes are probabilistic by nature too, and an adequate description of all the market processes needs to apply probabilistic approaches and models in the economic price – quantity space. The uncertainty law results from this principle.

We assume that, from one side, these five general principles are capable of sufficiently and adequately describing the basic structural and dynamic properties of market economic systems and the market processes within them. From other side, they can be regarded as the basic pillars of physical economics, which carry on constructing step-by-step the bodies or frameworks of our physical economic models. These principles and their substantiation will be repeatedly discussed in more detail and step-by-step in this book. Concluding, let us stress that new probabilistic economic theory has been built on the basis of these principles in this book.