Apr

22

 Since the topic of chemistry/market analogies has come up, I'm reminded of something I noticed while studying economics. Anyone else notice some resemblance between stoichiometry and the Cobb-Douglas production function?

Stoichiometry and the reaction rate equation: r = k(T) * A^n * B^m

And the Cobb-Douglas production function: Y=AL^{\beta}K^\alpha

What kind of "chemical" reactions can we find in the markets?

Something like this?

Trader-Cash_p + Stock <-> Trader-Stock + Cash_p

An important difference with this "reaction" is that _p, which is price, fluctuates; whereas chemical reactions always have the same stoichiometry. So, are there any useful analogies?


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