Economic thermodynamics and inflation

TL;DR

The paper addresses the challenge of explaining inflationary dynamics across regimes from hyperinflation to stable low inflation using a thermodynamic, Raychaudhuri-inspired framework. It models inflation as a scalar economic field with dynamics governed by a continuity equation and the Raychaudhuri equation, comparing adiabatic (δQ ≈ 0) and non-adiabatic (δQ ≠ 0) cases. Key findings show that adiabatic paths struggle to reach equilibrium, while non-adiabatic energy inflows can drive the system toward a stable balance (K=V) on timescales of about a decade, consistent with observed inflation cycles; hyperinflation can emerge for γ ≈ -1, with inflation slowing as the system evolves. The work provides a phenomenological, geometry-inspired lens connecting monetary policy and production continuity to thermodynamic-like balance, suggesting policy emphasis on controlled monetary flow and real production to achieve macroeconomic stability.

Abstract

This study presents a computational and theoretical framework inspired by thermodynamic principles to analyze the dynamics of economic inflation within adiabatic and non-adiabatic systems. In a framework referred to as developmental symmetry, inflation is formulated as a scalar field evolving through continuity equations, drawing an analogy with the Raychaudhuri equation in gravitational dynamics. The results show that adiabatic systems fail to reach equilibrium, while non-adiabatic systems can evolve toward stable states over time. The model successfully reproduces observed inflationary regimes-from hyperinflation to stable low-inflation phases-with characteristic transition periods of about a decade. These results indicate that production continuity and controlled monetary flow are crucial for achieving stability in complex economic systems, linking thermodynamic balance to macroeconomic equilibrium.

Figures (4)

• Figure 1: Conceptual representation of a subsystem within the economic system $E$. Points $A$ and $B$ indicate two representative positions in the system, scaled by $x$. The element at $A$ corresponds to purchasing power, while $B$ represents the value of goods or assets. During inflationary expansion, systemic forces act outward, reflecting a general increase in the scale of economic transactions. Fiscal and monetary interventions function as regulatory mechanisms that help maintain balance between purchasing power and asset prices within this dynamic structure.
• Figure 2: The relationship between the scale variable $x$ and time $t$. The exponential increase in $x$ represents the hyperinflationary phase of the system. In this regime, purchasing power, interpreted as the system's kinetic component, becomes almost negligible, while the rapid increase in prices is driven by accumulated asset values and capital concentration, corresponding to the potential component of the system.
• Figure 3: Figure showing the increase of the x scale in the (0-8) time interval.
• Figure 4: The figure shows the behavior of the x scale in the time interval (4-15). Here, $C_1=0.4$ is chosen.