Entropy and Economy


book_cover_big.gifIn the economics literature, one can find two opposing points of view: mainstream economists who believe that technological innovation will solve the degradation in quality of both energy and materials and that therefore growth can go on forever; and biophysical economists, who use the thermodynamic laws to argue that mainstream economists do not incorporate long-term sustainability in their models. For instance, the costs to repair the ozone hole or to mitigate increasing pollution are not accounted for in mainstream economic assessments. Industrial and agricultural processes accelerate the entropy production in our world. Entropy production can only go on until we reach the point where all available energy is transformed into non-available energy. The faster we go toward this end, the less freedom we leave for future generations. If entropy production were included in all economic models, the efficiency of standard industrial processes would show quite different results……..

Even if there were no humans on this planet, there would be continuous entropy production. So from that point of view the ecological system is not perfect, either; even the sun has a limited lifespan. The real problem for us is that, in our relentless effort to speed things up, we increase the entropy production process tremendously. In fact, you can see some similarity between economic systems and organisms: both take in low entropy resources and produce high entropy waste. This leaves fewer resources for future generations.

Although recycling will help a lot to slow down the depletion of the earth’s stocks of materials, it will only partly diminish the entropy production process. So whenever we design or develop economic or industrial processes, we should also have a look at the associated rate of entropy production compared to the natural “background” entropy production. We have seen that for reversible processes, the increase in entropy is always less than for irreversible processes. The practical translation of this is that high-speed processes always accelerate the rate of entropy production in the world. Going shopping on your bike is clearly a much better entropy choice than using your car.

Conclusion: the entropy clock is ticking, and can only go forward!

From:  The Second Law of Life

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book_cover_big.gifIn an earlier blog[1] I wrote about the connection between the Second Law, the economy  and the problem of a sustainable society. Of course the most important inputs on this topic were provided by Nicholas Georgescu-Roegen is his book  in 1971 entitled: The Entropy law and the Economic Process[2]. Georgescu-Roegen stated that the entropy law applies to everything we do, and that with every action that degrades energy (it is never really “used up”) entropy is produced, leaving a smaller entropy budget for future generations. In other words, he made us aware of the entropic constraint on all economic activity. The entropy law simply prevents us from creating a kind of perpetual cycle that would miraculously restore natural resources. Georgescu-Roegen’s main complaint about  economists is that they ignore this fact, and assume that everything in the economic process is cyclic in nature, and that in any case technology will provide us with solutions. However, it can be shown that often each new technology tends to accelerate the entropy production even more.

Interesting in this respect is a very recent publication by the Economics Web Institute: Innovative Economical Policies for Climate Change Mitigation[3]. About 30 economists, managers, consultants and technologists have gathered to describe 20 approaches to mitigate the climate change. Three key transitions (as they coin it) are needed: 

1) Transitions in market structures and firm behaviour

2) Transitions in consumer lifestyles and purchasing rules

3) Transition in government policy making

They argue that economical aspects must play a much stronger role climate change mitigation and that the neoclassical economical model (that reduces all entities to prices and quantities but neglects for instances the extinction of the human race) needs a major revision. Instead they believe that climate mitigation not necessarily must be considered as just a cost factor but merely as an opportunity for innovation, business growth, profit and employment.

The entire book counts more than 350 pages, I will in upcoming blogs zoom in on a few of the articles. In the mean time have a look at the web site of the Economics Web Institute (www.economicswebinstitute.org) as it contains tons of interesting articles, data and tables.

@ 2009 Copyright John Schmitz


[1] https://secondlawoflife.wordpress.com/category/entropy-and-economy/

                   [2] Georgescu-Roegen, Nicolas, The Entropy Law and the Economic Process, Harvard University Press, Cambridge, Massachusetts (1971)

[3] Innovative Economic Policies for Climate Change Mitigation

Piana V. (ed.), Aliyev S., Andersen M. M., Banaszak I., Beim M., Kannan B., Kalita B., Bullywon L., Caniëls M., Doon H., Gaurav J., Karbasi A.,  Komalirani Y., Kua H. W., Hussey K., Lee J., Masinde J., Matczak P., Mathew P. , Moghadam Z.  G., Mozafary M. M., Rafieirad S., Romijn H., Oltra V., Schram A., Malik V. S., Stewart G.,  Wagner Z., Weiler R. (2009), www.economicswebinstitute.org/innopolicymitigation.htm,  Economics Web Institute, Lulu.com.

book_cover_big.gifNicholas Georgescu-Roegen was born in Romania in 1906 and lived until 1994. Although he obtained a PhD in mathematical statistics, he familiarized himself with the new field of economics during a stay at Harvard University. In 1948, he fled Romania’s Communist regime and returned to the US to teach at Vanderbilt University, where he published many studies in economic science.

Georgescu-Roegen is important to our discussion, because he made a connection between the two fundamental laws of Thermodynamics (conservation of energy and increase in entropy) and the economic process. He describes all this in his seminal book,  The Entropy Law and the Economic Process, published in 1971. The book is not always easy to read, but that doesn’t detract from the power of his conclusions.  He tells us that the Second Law of Thermodynamics dictates that the world has a limited entropy budget. It’s like a bucket that holds only 10 liters of water: once it’s full, you can no longer collect water and you have to work with what you’ve got.

Georgescu-Roegen stated that the entropy law applies to everything we do, and that with every action that degrades energy (it is never really “used up”) entropy is produced, leaving a smaller entropy budget for future generations. In other words, he made us aware of the entropic constraint on all economic activity. It can be shown (see my book, Chapter 5) that even by recycling (for instance, glass bottles), we cannot go back to the original situation without lowering the quality of the natural resources that we consume. The entropy law simply prevents us from creating a kind of perpetual cycle that would miraculously restore natural resources.

Georgescu-Roegen’s main complaint about economists is that they ignore this fact, and assume that everything in the economic process is cyclic in nature, and that in any case technology will provide us with solutions. However, it can be shown that often each new technology tends to accelerate the entropy production even more.

Here’s a simple example: More and more people hop on a plane to go on vacation or  make a quick weekend visit to friends and relatives 1000 km away. Well, the burning of the aircraft’s fuel causes a tremendous increase in entropy, and that will never be reversed. Another example: cars allow us to live further away from work, but force us to spend lots of time in traffic jams while burning huge amounts of fossil fuels.

The message here is that if we want to save our planet for future generations, then we must be very responsible in the way we exploit non-renewable natural resources. There is simply no escape from the Second Law!