In conclusion, it is natural that the direct mechanical transfer of methods and concepts of physics into the economic theory would be impossible. We only can accurately borrow and transfer general concepts and formal methods, since economic and physical phenomena are principally different in their essence and content. In this book and within the framework of this approach, the basic concepts and general principles of physical economics are developed and described. On this basis, we have developed the complex of the principally new quantitative methods of calculation and analysis of many-good, many-agent market economies that we named probabilistic economic theory.
References
1. Ludwig von Mises. Human Action. A Treatise on Economics. Yale University, 1949.
2. Emmanual Farjoun and Moshé Machover. Laws of Chaos: a Probabilistic Approach to Political Economy. Verso, London, 1983).
3. Philip Ball. Physical Modelling of Human Social Systems. Complexus 2003; 1:190–206.
4. A.V. Kondratenko. Physical Modeling of Economic Systems. Classical and Quantum Economies. Nauka (Science): Novosibirsk, 2005.
5. K.K. Val’tukh. Development of a Probabilistic Economic Theory. Herald of the Russian Academy of Sciences, 2008, Vol. 98, N 1, p. 51–63.
PART A. The Agent-Based Physical Modeling of Market Economic Systems
“In the course of social events there prevails a regularity of phenomena to which man must adjust his actions if he wishes to succeed. It is futile to approach social facts with the attitude of a censor who approves or disapproves from the point of view of quite arbitrary standards and subjective judgments of value. One must study the laws of human action and social cooperation as the physicist studies the laws of nature. Human action and social cooperation seen as the object of a science of given relations, no longer as a normative discipline of things that ought to be”.
Ludwig von Mises. Human Action. A Treatise on Economics. Page 6
CHAPTER I. Fundamentals of the Method of Agent-Based Physical Modeling
“For a social collective has no existence and reality outside of the individual members’ actions. The life of a collective is lived in the actions of the individuals constituting its body. There is no social collective conceivable which is not operative in the actions of some individuals. The reality of a social integer consists in its directing and releasing definite actions on the part of individuals. Thus the way to a cognition of collective wholes is through an analysis of the individuals’ actions”.
Ludwig von Mises. Human Action. A Treatise on Economics. Page 43
“The whole market economy is a big exchange or market place, as it were. At any instant all those transactions take place which the parties are ready to enter into at the realizable price. New sales can be effected only when the valuations of at least one of the parties have changed”.
Ludwig von Mises. Human Action. A Treatise on Economics. Page 231
PREVIEW. What is the Main Point of the Concept of Agent-Based Physical Modeling?
The concept of agent-based physical modeling is based on taking the known, fundamental concepts of classical economic theory, and uniting and eventually converting them into probabilistic economic theory. It is described with the help of formal approaches and methods borrowed from theoretical physics, beginning with the method of equations of motion for many-particle physical systems. The role of the theoretical physics methods is only to provide the framework for physical economics and eventually for probabilistic economic theory. This theory is developed step-by-step with the creation of the more complicated models, each subsequent step building on the last. It includes and increases the number of concepts and principles of physical economics, and reflects on one or more of several fundamental features of the market economy. The first one, the cooperation-oriented agent principle, is the cornerstone of all the physical economic models which holds that all market phenomena have their origins in agents’ actions. To put it differently, since the action of the market as a whole is a result of the actions of all the market agents and nothing other, the market agents and their actions must be at the basis of the physical economic models. In other words, according to the agent principle, all market phenomena have their origins in agents’ actions.