Symmetries in economic models and their consequences

Professor Lee Smolin of the Perimeter Institute for Theoretical Physics examines the fundamental Arrow-Debreu model of market equilibrium in neoclassical economics. He asks the basic question always raised by physicists when confronting a new system: What are the system’s symmetries? Addressing this question, he argues that many markets have multiple equilibria. He also explores the application of the principle of gauge invariance to markets — an idea originally introduced by Malaney and Weinstein — and explains some of this principle’s consequences for economic theory.