The dismal science

Econophysics is the field where money and various economic theories meet physics. Applications of the laws of physics can be used to predict the behavior of financial markets, investor attitudes, and price fixation. One such example is the Elliot wave theory, which predicts the future of markets as waves of optimism and pessimism in the eyes of investors. Another very famous law is Pareto's law, formulated by Vilfredo Pareto, also known as the power law, which states that the number of people with an amount of wealth greater than "W", was directly proportional to 1/W raised to e, where e is a number between 2 and 3, usually 1.5. It simply stated that there were very few rich people. However this law was for approximately the top 3% of the population and the rest followed a different rule and their incomes were like the movement of atoms in a gas. Money, like energy and momentum or charge, can only flow from here to there and cannot be destroyed. Another cornerstone of modern economics is the famous game theory where a game or a strategic standoff is played by 2 or more players and each tries to maximize his/her payoff. The point where neither player can optimize his situation and improve his position to improve his payoff, or the point where the game has become deadlocked and the players are at an equilibrium stage is called 'Nash equilibrium', after John Forbes Nash who won the Nobel Prize in economics for his work on governing dynamics. Another famous algorithm is the Elo rating system, which is used to rank chess players. These two theories are used by industries, firms, and economists to predict market conditions and price fluctuations and then gain profits.  Eco isn't just about money, it is mainly about how sporadic systems work and vary.

                          The equal payoff stage in the bottom right corner where the two situations are matched





   

         Elo algorithm rating