Entropy and econophysics

Entropy is a central concept of statistical mechanics, which is the main branch of physics that underlies econophysics, the application of physics concepts to understand economic phenomena. It enters into econophysics both in an ontological way through the Second Law of Thermodynamics as this drives the world economy from its ecological foundations as solar energy passes through food chains in dissipative process of entropy rising and production fundamentally involving the replacement of lower entropy energy states with higher entropy ones. In contrast the mathematics of entropy as appearing in information theory becomes the basis for modeling financial market dynamics as well as income and wealth distribution dynamics. It also provides the basis for an alternative view of stochastic price equilibria in economics, as well providing a crucial link between econophysics and sociophysics, keeping in mind the essential unity of the various concepts of entropy