An Introduction to Socio- and Econo-Physics - with an Application to the Japanese Economy

Econophysics is a new approach to social and economic sciences. The basis of physics is calculus and probability, and this mathematical basis has been extended to economic theory. This leads to many new aspects of macro- and microeconomics, business, finance, social science and politics. In this presentation Juergen Mimkes will address several aspects of this research field and apply it to the case of the Japanese economy:

Calculus brings macroeconomics close to engineering, to the Carnot process of engines. Motors, heat pumps and refrigerators depend on two temperature levels, hot and cold. Trade depends on two levels and follows the simple rule: buy cheap, sell expensive. Production leads to two income levels: capital and labour. Banks work on two interest levels, savers and investors. Societies consist of two classes: rich and poor.

A running motor continuously heats up, a running fridge becomes continuously cooler. In both cases the efficiency, the difference of temperatures grows. If both temperatures are the same, the motor runs hot and stops. Or, in the case of the fridge, the door is open.

A profitable company gets continuously richer, and with this the difference between income and costs, the efficiency of production grows. If income and costs are the same, profits will stop and lead to stagnation. A well running economy continuously gets richer, and the efficiency, the difference between rich and poor, grows. In Japan, however, the lower incomes decline, whereas higher incomes stay at a nearly constant level. This is the refrigerator effect. The results may be compared to the Piketty model.

Juergen Mimkes is professor emeritus of physics at the Paderborn University, Germany. He graduated in physics in Goettingen and Berlin. He was professor of solid state physics at the TU Berlin, TU Clausthal and Paderborn, where he was department head from 1991 to 1993. In 2001 he was founding member of the section “socio-economic systems” in the German Physical Society. He was visiting professor in College Park, MD and Chuo University, and retired in 2004. He is coauthor of the several books, the latest is entitled “Econophysics and Physical Economics”, Oxford UP, 2014.