Generalised Business Mechanics

Peter Johnson

No 2007-FE-05, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: In this paper an analogy is established between a generalised system of point masses described by classical mechanics, and a set of discrete economic entities within a generalised resource framework. If the economic system is subject to a generalised variational Principle of Economy, the counterpart to Hamilton`s Principle of Action, the evolution of the system will be governed by a set of canonical equations that relate defined system measures of fortune and prosperity to changes in prices, and the use of resources. As a consequence, it is possible to establish the conservation of wealth measures in an ideal isolated economy system. The analogy may be further extended by associating rigid bodes in mechanics with business models in resource space. This allows business models to be grounded formally as matrices or tensors, where the principal axes correspond to distinctive competences or particular competitive advantages.

Date: 2007-05-01
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