Biophysical Study of Utility and Herding

Volume 11, Issue 3, June 2026     |     PP. 93-113      |     PDF (1625 K)    |     Pub. Date: June 11, 2026
DOI: 10.54647/economics790538    18 Downloads     223 Views  

Author(s)

Len-Kuo Hu, Department of International Business, National Chengchi University, Taipei, Taiwan
Yushiu Lin, Department of Finance and Information, National Kaohsiung University of Science and Technology, Kaohsiung, Taiwan

Abstract
This study presents a biophysical perspective on the prevailing herding behavior observed in politics and finance. By reconceptualizing individual utility as the outcome of consuming a finite reservoir of internal energy –termed volition--over the course of life, this study develops a dynamic model of volition analogous to the linear cable equation for nerve impulses, informed by the Second Law of Thermodynamics. In particular, it identifies a threshold condition under which social learning can overpower the natural diminishing tendency of marginal utility implied by the Second Law. The analysis further examines the manifestations of herding in both political and financial contexts. In politics, the rise of populist anger, ideological fragmentation, and party polarization exemplifies such dynamics. In finance, herding appears when asset prices diverge sharply from their fundamental book values. An empirical illustration is provided by the extraordinarily high price-to-earnings ratios of leading AI firms such as Nvidia.

Keywords
herding behavior, social learning, entropy and evolution, dynamics of volition, biophysics of utility function

Cite this paper
Len-Kuo Hu, Yushiu Lin, Biophysical Study of Utility and Herding , SCIREA Journal of Economics. Volume 11, Issue 3, June 2026 | PP. 93-113. 10.54647/economics790538

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