Physics – Condensed Matter – Statistical Mechanics
Scientific paper
2000-09-19
Quantitative Finance 1, 186-190 (2001)
Physics
Condensed Matter
Statistical Mechanics
7 pages, 3 figures
Scientific paper
10.1080/713665545
Why is ``worthless'' fiat money generally accepted as payment for goods and services? In equilibrium theory, the value of money is generally not determined: the number of equations is one less than the number of unknowns, so only relative prices are determined. In the language of mathematics, the equations are ``homogeneous of order one''. Using the language of physics, this represents a continuous ``Goldstone'' symmetry. However, the continuous symmetry is often broken by the dynamics of the system, thus fixing the value of the otherwise undetermined variable. In economics, the value of money is a strategic variable which each agent must determine at each transaction by estimating the effect of future interactions with other agents. This idea is illustrated by a simple network model of monopolistic vendors and buyers, with bounded rationality. We submit that dynamical, spontaneous symmetry breaking is the fundamental principle for fixing the value of money. Perhaps the continuous symmetry representing the lack of restoring force is also the fundamental reason for large fluctuations in stock markets.
Bak Per
Norrelykke Simon F.
Shubik Martin
No associations
LandOfFree
Money and Goldstone modes does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Money and Goldstone modes, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Money and Goldstone modes will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-367377