F. PATRICK CUNNANE

Drawing upon nearly three decades of money management insight and experience as a corporate investment advisor, Cunnane developed The Physics to Economics Model (PEM), a practical, usable modern theory of economic growth and development. This ground-breaking work applies the same fundamental reasoning inherent in the laws of physics to unveil how our economy actually operates, and demonstrates how a physics-based approach to the U.S. economy could significantly increase American wealth.

The formula I wrote E=1/2e(Tr)2 is part of the Physics to Economics

Model and appears in the book on pages 82 and 259.

The book uses the formula, plus other formulas, to explain how economics operates. The book is available on Amazon. There is also a web-site for the book (and it can be ordered through the website as well).

Specifically, E=1/2e(Tr)² explains the application of energy as kilowatt hours into an economic system where the output or, demonstration of change, in an economic system will be an increase / decrease in the number of transactions in time, or the change in the Transaction rate (rate is the measure of time) as the (Tr) portion of the formula. The small “e” is the economic system to be accelerated. The (E) is the energy input. In the logic of physics, the change is one half of the mass multiplied by the velocity (distance/time)². This means there is a 4 to 1 relationship of mass to velocity. The Physics to Economics Model is following the logic of physics or kinetic energy which is E=1/2mv².

A real example of how the formula is applied specifically to investing would be how the asset allocation of a retirement plan portfolio would be designed. A specific example would be the Ukrainian war which began in 2022 and the economic consequences that would occur. Clearly Western Europe is Russian energy dependent. The result was going to be a Western European decline in its energy input and therefore its equity markets, particularly in Germany, would decline.

The formula E=1/2e(Tr)² clearly predicts equity markets in Germany and much of Western will decline. Also, the amount of the decline will be greater than a ratio of the quantity of the change in energy because the Transaction rate is squared. Less energy will dramatically and negatively accelerate the German Transaction rate downward.

Economics must follow the laws of physics. Only energy (E) can cause a change and a change must be demonstrated by a change of some object over distance and in time.

The First Principles of Economics

The Physics to Economics Model (PEM)

What is economics? Ask anyone and unless they are academic they will likely struggle for an answer. Even those who are professionals in the field, including academics, still cannot quite provide a clear, useable definition which conforms to observation, science and is universally true. If the definition of economics was reasonably useful it would be able to crosscut through capitalism, communism, or any ideology and be relative to the fundamental concepts for most observations.

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‘The current, accepted academic definition of economics as “a social science relating to the production, consumption, and distribution of goods and services,” is impractical when applied to problem solving.’

Cunnane has never believed in, accepted, or found useful from a practical perspective, the traditional, social science-based economic theories that have repeatedly failed to produce wealth. In fact, he believes that the very social science policies which were supposedly implemented to improve the quality of life for Americans have not only made the nation less wealthy but are destroying it.

As Cunnane discusses in The Physics to Economics Model (PEM), anyone whose job it is to advise American businesses can clearly see that the rate of business failure in recent years is too high and corporate departures to lower-taxation countries are too numerous. Yet, historically, America was by far the wealthiest nation up until the 1970s. For years, wealth increased as the markets, debt, the cost of capital, and trade historically performed well. However, the American economy abruptly became weaker and weaker.

The Physics to Economic Model (PEM) takes an introspective look at the U.S. economy over the past 50+ years, providing insight and answers to how economic policy has historically operated vs. how it should operate to create and increase real wealth. Cunnane makes a compelling argument for why economics, as a discipline, must follow the rules of natural science, based on the premise that it’s of the natural world. As such, economic policy should follow the reasoning of mathematics and physics, not social science, because the economy is subject to those rules and laws; time, distance, gravity, mass and the interrelationship with energy.

In The Physics to Economics Model (PEM), Cunnane illustrates how the study of modern economic theory becomes more logical, rational, and easier to understand within the reasoning process of physics and how this approach can lead to a sustained increase in wealth over time.

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