John RutledgeIn economic thermodynamics, John Rutledge (c.1948-) is an American economics consultant and investor notable for his 2006 Beijing University of Technology lecture “Thermodynamics and Economics”, for his 2008 book Lessons From a Road Warrior, wherein he outlines a thermo-economics framework for investing, and for his 2012-launched teaching of Claremont Graduate University course "Topics in Far from Equilibrium Economics: Evolutionary Economics and Finance", a human thermodynamics education type of course, wherein, getting away from the older agent-based equilibrium economics models, he uses nonequilibrium thermodynamics to help understand phenomena such as periodic booms, busts, recessions, depressions, and financial crises.

In his 2006 lectures “Thermodynamics and Economics” presented at the Beijing University of Technology, Rutledge uses a thermodynamics framework to re-think economics and finance, the synopsis of which is as follows: [1]

“My basic premise is that economic activity is a transformation of current or vintage thermal energy into kinetic, or coherent motion, which we call work or GDP. Energy is stored in vessels (batteries)–natural resources, plants, animals, people, technology, and capital goods. As economic agents, we are gradient-seeking systems, transforming energy into work (GDP) and cost or waste (entropy). Differing endowments of the various forms of stored energy lead to differing relative prices in different closed systems (countries, markets). International trade creates an open system in which the second law (arbitrage) drives relative prices (temperatures, pressures) together.

Boltzmann’s distribution gives a useful way to think about the impact of relative price differentials and transactions costs (Boltzmann’s constant) on the speed of convergence toward thermal equilibrium. When the differential is small the adjustment is smooth. When the differential is great or the bandwidth connecting the closed systems is high relative to both systems (fiber optic cable connecting service sectors with effectively infinite capacity) the adjustment can be abrupt, discontinuous, and chaotic, leading to potentially violent trade wars and other frictions, as shown in the literature on non-equilibrium thermodynamics. Relative price differentials between China and America, together with massive optical fiber capacity connecting the systems, is a potentially volatile situation. Both countries should give serious consideration to stability when setting policies, giving high priority to a stable currency regime.”

In his 2008 book Lessons From a Road Warrior, Rutledge outlines what he calls his “thermo-economics framework for investing” that shapes the way he sees the world today, according to which he uses a thermodynamics-based framework to help understand the important economic, financial, and political forces that shape human existences and determines the value of homes and stock portfolios. [2]

Rutledge completed his BA in economics in 1970 at Lake Forest College, Illinois, his PhD in economics in 1973 at the University of Virginia, after which he began working as an economics professor at: Lake Forest College (1969-1970), University of Virginia (197-1973), Tulane University (1973), University of Konstanz, Germany (1976), Claremont McKenna College (1976-1983), after which he founded the Claremont Economics Institute (1979-1991), an economic advisory and forecasting company, after which he founded Rutledge Capital LLC, a private equity investment and forecasting company (1991-present). Recent activity includes being a contributing columnist to Forbes (1994-present), visiting professor at the Chinese Academy of Sciences (2007-present), senior research professor at Claremont Graduate University (2009-present), and instructor in the MBA managerial economics program of Bethel University (2011-present).

1. Rutledge, John. (2006). “Thermodynamics and Economics” (abs), Beijing University of Technology, May 21.
2. Rutledge, John. (2008). Lessons From a Road Warrior. Rutledge Research.

External links
‚óŹ John Rutledge –

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