Gravity in Economics

I was quite surprised to learn today that our trusted friend gravity is also called upon to help in economic theories. Namely, there is a “gravitic model of trade” that predicts trade between two entities based on their size and economic weight, and the distance between the two.

I came upon this concept today when I read a post in Marginal Revolution on how Portugal has a very low economic gravity which is due to its position close to the Eurozone and rather less wealthy Northern African countries while being far away from everything else.

Maybe the best part about this theory for me is that it just fits so nicely into the physical world I know of — it is both simple and yet it carries a lot of weight, and I can really appreciate something like that. Indeed, if one looks at the formula given to calculate this gravitic force, it looks nearly exactly the same as the general formula for gravitational attraction between two objects.

And that, as I said, is something that I really appreciate. Sure, the actual use of the formula is more complex than the standard form but that is only natural — what matters is how something that most people would consider to be a part of hard physics has been brought into economics as well.

I am very much looking forward to the next discovery that I’ll make in line with this one!

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