Mathematical programming in economics by physical analogies

Abstract

This article is the first of a series of three in which we establish and solve a physical analogy of the economic model underlying mathematical programming. Basically, the first article is a reexamination of the fundamental assumptions underlying quasi-static models in economics and engineering, with a view to the estab lishment of a conceptual framework common to both disciplines. At the microscopic level it is demonstrated that the assumptions of perfect competition can be cast in a form analogous to the one used in statistical physics. At the macroscopic level it is shown that measurements in economics and physics can be classified in identical manners with the result that derived relationships, like Ohm's law and demand curves or electric power and total revenue, can be made analogous concepts. On this basis it is then asserted that underlying economics we find two basic laws which, apart from a single change in sign, are completely analogous to the well-known first and second laws of thermodynamics.