Panagis S. Liossatos
Office: DM 316, (305) 348-3281
PhD: University of Pennsylvania, 1968
Joined the faculty in 1981
Department Chair from 1994 to 2003
Fields: Economic dynamics, statistical mechanics in economic analysis
As a physicist turned economist, I am naturally inclined to explore the possibility of using concepts and methods of theoretical physics in tackling problems of economic analysis. My most recent study concerns the statistical mechanics alternative to the Arrow-Debreu concept of economic equilibrium [along the lines of Duncan K. Foley]. That statistical mechanics constitutes a valid theoretical framework outside the domain of physics is not paradoxical. For after the pioneering work of E. T. Jaynes, one may view statistical physics as an instance of a broader general systems formalism or generalized statistical mechanics, which is independent of physical properties and therefore applicable to a variety of disciplines. It provides a well-founded principle of probability assignment under conditions of incomplete information, known as the maximum statistical entropy principle. The fact that the knowledge of micro-behavior is not sufficient to understand macro-phenomena is attributed to the failure of recognizing the workings of this principle. Loosely speaking, an economy’s macro-state has an additional property (degree of disorder or statistical entropy) that is not determined by its micro-state. The statistical mechanical paradigm, therefore, provides a missing inter-level theory for economic analysis— a framework for linking micro-behavior to macro-phenomena, which is more appealing than the representative-agent approach.
Furthermore, this inter-level theory brings forth some exciting new prospects for disequilibrium analysis and economic dynamics. As a preliminary step in this direction, I have demonstrated that the statistical mechanical model of markets gives rise to a phenomenological theory of resource allocation: the allocation of given amounts of resources among a set of trading economies is governed by a constrained optimization principle known as the principle of maximum entropy. The derivation of the latter from first economic principles is expected to provide the foundation for the systematic use of the vast analytical apparatus of equilibrium and non-equilibrium thermodynamics in economic theory. It is the non-equilibrium part that will provide the link to my earlier research on the relation between nonlinear dynamics, evolutionary theory, and economic change; and the impetus for advancing that research to a new plane.
The adoption of generalized statistical mechanics as an inter-level theory in economics raises a host of methodological issues surrounding the meaning of probability, the question of deductive logic versus plausible reasoning, etc. The general question of how probability is to be understood even in the context of statistical physics is still a subject of debate. We need more clarity on this matter in economics as well, especially when one envisions probability at the foundation of economic theory. This is yet another area of investigation that I intend to pursue.
Statistical Entropy in General Equilibrium Theory. Working Paper # 04-14, Department of Economics, Florida International University, 2004.
Technological Evolution through Creative Destruction," Advances in Systems Science and Applications, Inauguration Issue: 43-51, 1995.
Technical Progress, Diffusion and Uneven Growth: An Evolutionary Vintage Model. In, New Directions in Analytical Political Economy, A.K. Dutt (ed.), Ch. 6, Edward Elgar, 1994.
Vintage Capital, Technological Uncertainty and Efficiency Waves in One-Good Economies. Modeling and Simulation, Proceedings of the Twenty-Third Annual Pittsburgh Conference 23: 517-529, 1992.
Value and Competition in a Spatial Context: A Marxian Model. Papers of the Regional Science Association 64:1-10, 1988.
Commodity Production and Interregional Transfers of Value. In, Regional Analysis and the New International Division of Labor, F. Moulaert and P.W. Salinas (eds.), Ch. 5, Kluwer-Nijhoff, 1983.
Socio-economic Dimensions of the Arms Race. Conflict Management and Peace Science 5(1): 55-68, 1980.
Spatial Dynamics: Some Conceptual and Mathematical Issues. Environment and Planning A 12: 1051-1071, 1980.
Spatial Dynamics and Optimal Space-Time Development. North-Holland, 1979 (with W. Isard).
General Micro Behavior and Optimal Macro Space-Time Planning. Regional Science & Urban Economics 5 (3): 285-323, 1975 (with W. Isard).