Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of statistical mechanics to economic theory. Thermoeconomics can be thought of as the statistical physics of economic value and is a subfield of econophysics. 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, one of the fathers of chemistry''

Thermoeconomists maintain that human

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, entit ...

s can be modeled as thermodynamic systems. 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 part ...

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 ...

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 thermodyna ...

, 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 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 ea ...

laws of thermodynamics are developed. The global economy is viewed as an open system. Moreover, many economic activities result in the formation of structures. Thermoeconomics applies the statistical mechanics of non-equilibrium thermodynamics to model these activities. 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. Energy-and-economics1

Energy Return on Investment

EROI = \frac

Thermoeconomics is based on the proposition that the role of

in biological evolution 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"), unle ...

but in terms of such economic criteria as productivity, 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. Balloon graph representing quality EROI

Peak Oil

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.''

References

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