Newtonian and Lagrangian Mechanics of a Production System
Self archived versionfinal draft
MetadataShow full item record
CitationEstola Matti. Dannenberg Alia Asha. (2016). Newtonian and Lagrangian Mechanics of a Production System. Hyperion International Journal of Econophysics & New Economy, 9 (2) , 7-26.
We define the economic correspondents for kinetic and potential energy of production and mutually coherent Newtonian and Lagrangian frameworks for modeling production. The neoclassical theory is shown to correspond to zero-force situation in the introduced framework where the potential energy of the production system is in its minimum. This explains why it has been difficult to explain real world production dynamics by using the neoclassical framework. Our framework adds dynamics in the neoclassical theory and includes in it cases like firms’ permanent growth, business cycles, and bankruptcies. These are impossible events in the neoclassical framework that assumes firms to produce at constant positive profit maximizing flow of production. JEL: D21, C62, O12.