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Thermoeconomics, also referred to as biophysical economics, is a school of
heterodox economics Heterodox economics is any economic thought or theory that contrasts with orthodox schools of economic thought, or that may be beyond neoclassical economics.Frederic S. Lee, 2008. "heterodox economics," ''The New Palgrave Dictionary of Economics' ...
that applies the laws of statistical mechanics to economic theory. Thermoeconomics can be thought of as the
statistical physics Statistical physics is a branch of physics that evolved from a foundation of statistical mechanics, which uses methods of probability theory and statistics, and particularly the mathematical tools for dealing with large populations and approxima ...
of
economic value In economics, economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured through units of currency, and the interpretation is therefore "what is the maximum amount of money a spec ...
and is a subfield of
econophysics Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynam ...
. It is the study of the ways and means by which human societies procure and use energy and other biological and physical resources to produce, distribute, consume and exchange goods and services, while generating various types of waste and environmental impacts. Biophysical economics builds on both social sciences and natural sciences to overcome some of the most fundamental limitations and blind spots of conventional economics. It makes it possible to understand some key requirements and framework conditions for economic growth, as well as related constraints and boundaries.


Thermodynamics

''"Rien ne se perd, rien ne se crée, tout se transforme"'' ''"Nothing is lost, nothing is created, everything is transformed."'' -''
Antoine Lavoisier Antoine-Laurent de Lavoisier ( , ; ; 26 August 17438 May 1794),
CNRS (
economic system An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities ...
s can be modeled as
thermodynamic system A thermodynamic system is a body of matter and/or radiation, confined in space by walls, with defined permeabilities, which separate it from its surroundings. The surroundings may include other thermodynamic systems, or physical systems that are ...
s. Thermoeconomists argue that economic systems always involve
matter In classical physics and general chemistry, matter is any substance that has mass and takes up space by having volume. All everyday objects that can be touched are ultimately composed of atoms, which are made up of interacting subatomic parti ...
,
energy In physics, energy (from Ancient Greek: ἐνέργεια, ''enérgeia'', “activity”) is the quantitative property that is transferred to a body or to a physical system, recognizable in the performance of work and in the form of heat ...
,
entropy Entropy is a scientific concept, as well as a measurable physical property, that is most commonly associated with a state of disorder, randomness, or uncertainty. The term and the concept are used in diverse fields, from classical thermodynam ...
, and
information Information is an abstract concept that refers to that which has the power to inform. At the most fundamental level information pertains to the interpretation of that which may be sensed. Any natural process that is not completely random, ...
.Baumgarter, Stefan. (2004)
Thermodynamic Models
Modeling in Ecological Economics (Ch. 18)
Then, based on this premise, theoretical economic analogs of the
first First or 1st is the ordinal form of the number one (#1). First or 1st may also refer to: *World record, specifically the first instance of a particular achievement Arts and media Music * 1$T, American rapper, singer-songwriter, DJ, and reco ...
and
second The second (symbol: s) is the unit of time in the International System of Units (SI), historically defined as of a day – this factor derived from the division of the day first into 24 hours, then to 60 minutes and finally to 60 seconds each ...
laws of thermodynamics are developed. The global economy is viewed as an open system. Moreover, many economic activities result in the formation of
structures A structure is an arrangement and organization of interrelated elements in a material object or system, or the object or system so organized. Material structures include man-made objects such as buildings and machines and natural objects such a ...
. Thermoeconomics applies the statistical mechanics of
non-equilibrium thermodynamics Non-equilibrium thermodynamics is a branch of thermodynamics that deals with physical systems that are not in thermodynamic equilibrium but can be described in terms of macroscopic quantities (non-equilibrium state variables) that represent an ext ...
to model these activities. In thermodynamic terminology, human economic activity may be described as a
dissipative system A dissipative system is a thermodynamically open system which is operating out of, and often far from, thermodynamic equilibrium in an environment with which it exchanges energy and matter. A tornado may be thought of as a dissipative system. Di ...
, which flourishes by consuming free energy in transformations and exchange of resources, goods, and services.


Energy Return on Investment In energy economics and ecological energetics, energy return on investment (EROI), also sometimes called energy returned on energy invested (ERoEI), is the ratio of the amount of usable energy (the ''exergy'') delivered from a particular energy r ...

EROI = \frac Thermoeconomics is based on the proposition that the role of
energy In physics, energy (from Ancient Greek: ἐνέργεια, ''enérgeia'', “activity”) is the quantitative property that is transferred to a body or to a physical system, recognizable in the performance of work and in the form of heat ...
in
biological evolution Evolution is change in the heritable characteristics of biological populations over successive generations. These characteristics are the expressions of genes, which are passed on from parent to offspring during reproduction. Variation ...
should be defined and understood not through the
second law of thermodynamics The second law of thermodynamics is a physical law based on universal experience concerning heat and energy interconversions. One simple statement of the law is that heat always moves from hotter objects to colder objects (or "downhill"), unless ...
but in terms of such economic criteria as
productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
,
efficiency Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...
, and especially the costs and benefits (or profitability) of the various mechanisms for capturing and utilizing available energy to build biomass and do work.


Peak Oil Peak oil is the hypothetical point in time when the maximum rate of global oil production is reached, after which it is argued that production will begin an irreversible decline. It is related to the distinct concept of oil depletion; while ...


Political Implications

''" e escalation of social protest and political instability around the world is causally related to the unstoppable thermodynamics of global hydrocarbon energy decline and its interconnected environmental and economic consequences."''


Energy Backed Credit

''Under this analysis, a reduction of GDP in advanced economies is now likely:'' # ''when we can no longer access consumption via adding credit, and'' # ''with a shift towards lower quality and more costly energy and resources.'' ''The 20th  century experienced increasing energy quality and decreasing energy prices. The 21st century will be a story of decreasing energy quality and increasing energy cost.''


See also

*
Econophysics Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynam ...
*
Ecodynamics Ecodynamics is a part of applied economics. It covers knowledge on monetary value, the usage of money, and the money flow.Trond AndresenFundamental financial accumulation dynamics Department of Engineering Cybernetics, NT, Trondheim, Norway, Augus ...
*
Kinetic exchange models of markets Kinetic exchange models are multi-agent dynamic models inspired by the statistical physics of energy distribution, which try to explain the robust and universal features of income/wealth distributions. Understanding the distributions of income ...
*
Systems ecology Systems ecology is an interdisciplinary field of ecology, a subset of Earth system science, that takes a holism, holistic approach to the study of ecological systems, especially ecosystems. Systems ecology can be seen as an application of general ...
* Ecological economics *
Nicholas Georgescu-Roegen Nicholas Georgescu-Roegen (born Nicolae Georgescu, 4 February 1906 – 30 October 1994) was a Romanian mathematician, statistician and economist. He is best known today for his 1971 ''The Entropy Law and the Economic Process'', in which he argu ...
*
Energy quality Energy quality is a measure of the ease with which a form of energy can be converted to useful work or to another form of energy: i.e. its content of thermodynamic free energy. A high quality form of energy has a high content of thermodynamic fr ...
*
Limits to growth ''The Limits to Growth'' (''LTG'') is a 1972 report that discussed the possibility of exponential economic and population growth with finite supply of resources, studied by computer simulation. The study used the World3 computer model to simul ...


References


Further reading

* * * *Chen, Jing (2015)
''The Unity of Science and Economics: A New Foundation of Economic Theory''
Springer. *Charles A.S. Hall, Kent Klitgaard (2018)
''Energy and the Wealth of Nations: An Introduction to Biophysical Economics''
Springer. *Jean-Marc Jancovici, Christopher Blain (2020)
''World Without End''
Europe Comics *N.J. Hagens (2019)
''Economics for the future – Beyond the superorganism''
Science Direct. *Nafeez Ahmed (2017)
''Failing States, Collapsing Systems: BioPhysical Triggers of Political Violence''
Springer Briefs in Energy *Smil, Vaclav (2018)
''Energy and Civilization: A History''
MIT Press


External links

*Yuri Yegorov, article Econo-physics: A Perspective of Matching Two Sciences, Evol. Inst. Econ. Rev. 4(1): 143–170 (2007) *Borisas Cimbleris (1998)

*Schwartzman, David. (2007).
The Limits to Entropy: the Continuing Misuse of Thermodynamics in Environmental and Marxist theory
, In Press, Science & Society. *Saslow, Wayne M. (1999).
An Economic Analogy to Thermodynamics
''American Association of Physics Teachers''.
Biophysical Economics Institute
{{Schools of economic thought Schools of economic thought Industrial ecology Ecological economics