Thermoeconomics

Thermoeconomics

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Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics
Heterodox economics
"Heterodox economics" refers to approaches or to schools of economic thought that are considered outside of "mainstream economics". Mainstream economists sometimes assert that it has little or no influence on the vast majority of academic economists in the English speaking world. "Mainstream...

 that applies the laws of thermodynamics
Laws of thermodynamics
The four laws of thermodynamics summarize its most important facts. They define fundamental physical quantities, such as temperature, energy, and entropy, in order to describe thermodynamic systems. They also describe the transfer of energy as heat and work in thermodynamic processes...

 to economic theory. The term "thermoeconomics" was coined in 1962 by American engineer Myron Tribus
Myron Tribus
Myron T. Tribus was the director of the Center for Advanced Engineering Study at MIT. He headed the center when it published W. Edwards Deming's book, Out of the Crisis, and became a leading supporter and interpreter of W. Edwards Deming...

, and developed by the statistician
Statistician
A statistician is someone who works with theoretical or applied statistics. The profession exists in both the private and public sectors. The core of that work is to measure, interpret, and describe the world and human activity patterns within it...

 and economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 Nicholas Georgescu-Roegen
Nicholas Georgescu-Roegen
Nicholas Georgescu-Roegen, born Nicolae Georgescu was a Romanian mathematician, statistician and economist, best known for his 1971 magnum opus The Entropy Law and the Economic Process, which situated the view that the second law of thermodynamics, i.e., that usable "free energy" tends to disperse...

. Thermoeconomics can be thought of as the statistical physics
Statistical physics
Statistical physics is the branch of physics that uses methods of probability theory and statistics, and particularly the mathematical tools for dealing with large populations and approximations, in solving physical problems. It can describe a wide variety of fields with an inherently stochastic...

 of economic value
Value theory
Value theory encompasses a range of approaches to understanding how, why and to what degree people should value things; whether the thing is a person, idea, object, or anything else. This investigation began in ancient philosophy, where it is called axiology or ethics. Early philosophical...

.

Basis


Thermoeconomics is based on the proposition that the role of energy
Energy
In physics, energy is an indirectly observed quantity. It is often understood as the ability a physical system has to do work on other physical systems...

 in biological evolution should be defined and understood through the second law of thermodynamics
Second law of thermodynamics
The second law of thermodynamics is an expression of the tendency that over time, differences in temperature, pressure, and chemical potential equilibrate in an isolated physical system. From the state of thermodynamic equilibrium, the law deduced the principle of the increase of entropy and...

 but in terms of such economic criteria as productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

, efficiency, and especially the costs and benefits (or profitability) of the various mechanisms for capturing and utilizing available energy to build biomass and do work.

Thermodynamics


Thermoeconomists maintain that human economic system
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...

s can be modeled as thermodynamic system
Thermodynamic system
A thermodynamic system is a precisely defined macroscopic region of the universe, often called a physical system, that is studied using the principles of thermodynamics....

s. Then, based on this premise, theoretical economic analogs of the first
First law of thermodynamics
The first law of thermodynamics is an expression of the principle of conservation of work.The law states that energy can be transformed, i.e. changed from one form to another, but cannot be created nor destroyed...

 and second
Second law of thermodynamics
The second law of thermodynamics is an expression of the tendency that over time, differences in temperature, pressure, and chemical potential equilibrate in an isolated physical system. From the state of thermodynamic equilibrium, the law deduced the principle of the increase of entropy and...

 laws of thermodynamics are developed. In addition, the thermodynamic quantity exergy
Exergy
In thermodynamics, the exergy of a system is the maximum useful work possible during a process that brings the system into equilibrium with a heat reservoir. When the surroundings are the reservoir, exergy is the potential of a system to cause a change as it achieves equilibrium with its...

, i.e. measure of the useful work energy of a system, is one measure of value
Value theory
Value theory encompasses a range of approaches to understanding how, why and to what degree people should value things; whether the thing is a person, idea, object, or anything else. This investigation began in ancient philosophy, where it is called axiology or ethics. Early philosophical...

. In thermodynamics, thermal systems exchange heat
Heat
In physics and thermodynamics, heat is energy transferred from one body, region, or thermodynamic system to another due to thermal contact or thermal radiation when the systems are at different temperatures. It is often described as one of the fundamental processes of energy transfer between...

, work
Work (thermodynamics)
In thermodynamics, work performed by a system is the energy transferred to another system that is measured by the external generalized mechanical constraints on the system. As such, thermodynamic work is a generalization of the concept of mechanical work in mechanics. Thermodynamic work encompasses...

, and or mass
Mass
Mass can be defined as a quantitive measure of the resistance an object has to change in its velocity.In physics, mass commonly refers to any of the following three properties of matter, which have been shown experimentally to be equivalent:...

 with their surroundings; in this direction, relations between the energy
Energy
In physics, energy is an indirectly observed quantity. It is often understood as the ability a physical system has to do work on other physical systems...

 associated with the production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...

, distribution
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...

, and consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...

 of goods and services can be determined.

Economic systems


Thermoeconomists argue that economic systems always involve matter
Matter
Matter is a general term for the substance of which all physical objects consist. Typically, matter includes atoms and other particles which have mass. A common way of defining matter is as anything that has mass and occupies volume...

, energy
Energy
In physics, energy is an indirectly observed quantity. It is often understood as the ability a physical system has to do work on other physical systems...

, entropy
Entropy
Entropy is a thermodynamic property that can be used to determine the energy available for useful work in a thermodynamic process, such as in energy conversion devices, engines, or machines. Such devices can only be driven by convertible energy, and have a theoretical maximum efficiency when...

, and information
Information
Information in its most restricted technical sense is a message or collection of messages that consists of an ordered sequence of symbols, or it is the meaning that can be interpreted from such a message or collection of messages. Information can be recorded or transmitted. It can be recorded as...

. Moreover, the aim of many economic activities is to achieve a certain structure. In this manner, thermoeconomics applies the theories in non-equilibrium thermodynamics
Non-equilibrium thermodynamics
Non-equilibrium thermodynamics is a branch of thermodynamics that deals with systems that are not in thermodynamic equilibrium. Most systems found in nature are not in thermodynamic equilibrium; for they are changing or can be triggered to change over time, and are continuously and discontinuously...

, in which structure formations called dissipative structures form, and information theory
Information theory
Information theory is a branch of applied mathematics and electrical engineering involving the quantification of information. Information theory was developed by Claude E. Shannon to find fundamental limits on signal processing operations such as compressing data and on reliably storing and...

, in which information entropy
Information entropy
In information theory, entropy is a measure of the uncertainty associated with a random variable. In this context, the term usually refers to the Shannon entropy, which quantifies the expected value of the information contained in a message, usually in units such as bits...

 is a central construct, to the modeling of economic activities in which the natural flows of energy and materials function to create scarce resources. In thermodynamic terminology, human economic activity may be described as a dissipative system, which flourishes by consuming free energy in transformations and exchange of resources, goods, and services.

See also

  • Ecodynamics
    Ecodynamics
    Ecodynamics is a part of applied economics. It deals with monetary value, the usage of money, money flow, labour, and capital.-External links:* * The International Society for Ecological Economics - http://www.ecoeco.org/...

  • Kinetic exchange models of markets
    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....

  • Systems ecology
    Systems ecology
    Systems ecology is an interdisciplinary field of ecology, taking a holistic approach to the study of ecological systems, especially ecosystems. Systems ecology can be seen as an application of general systems theory to ecology. Central to the systems ecology approach is the idea that an ecosystem...

  • Ergosophy
    Ergosophy
    Ergosophy is a term coined by the scientist Frederick Soddy, in the early 1920s, and refers to aspects of energy in relation to human existence and energy measurement as in...

  • Useful work growth theory
    Useful work growth theory
    The Useful work growth theory, also called the Ayres-Warr model, states that physical and chemical work performed by energy, or more correctly exergy, has historically been the most important driver of economic growth...


External links