Thermoeconomics, also referred to as biophysical economics, is a school of

heterodox economics Heterodox economics is a broad, relative term referring to schools of economic thought which are not commonly perceived as belonging to mainstream economics. There is no absolute definition of what constitutes heterodox economic thought, as it i ...

that applies the laws of statistical mechanics to economic theory. Thermoeconomics can be thought of as the

statistical physics In physics, statistical mechanics is a mathematical framework that applies statistical methods and probability theory to large assemblies of microscopic entities. Sometimes called statistical physics or statistical thermodynamics, its applicati ...

economic value In economics, economic value is a measure of the benefit provided by a goods, good or service (economics), service to an Agent (economics), economic agent, and value for money represents an assessment of whether financial or other resources are ...

and is a subfield of

econophysics Econophysics is a non-orthodox (in economics) 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 ...

. 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), When reduced without charcoal, it gave off an air which supported respiration and combustion in an enhanced way. He concluded that this was just a pure form of common air and that i ...
, 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 an economy. It includes the combination of the various institutions, agencies, entities, decision-making proces ...

s can be modeled as

thermodynamic system A thermodynamic system is a body of matter and/or radiation separate from its surroundings that can be studied using the laws of thermodynamics. Thermodynamic systems can be passive and active according to internal processes. According to inter ...

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 pa ...

energy Energy () is the physical quantity, quantitative physical property, property that is transferred to a physical body, body or to a physical system, recognizable in the performance of Work (thermodynamics), work and in the form of heat and l ...

entropy Entropy is a scientific concept, most commonly associated with states of disorder, randomness, or uncertainty. The term and the concept are used in diverse fields, from classical thermodynamics, where it was first recognized, to the micros ...

, and

information Information is an Abstraction, abstract concept that refers to something which has the power Communication, to inform. At the most fundamental level, it pertains to the Interpretation (philosophy), interpretation (perhaps Interpretation (log ...

.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 a unit of time derived from the division of the day first into 24 hours, then to 60 minutes, and finally to 60 seconds each (24 × 60 × 60 = 86400). The current and formal definition in the International System of U ...

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 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 ex ...

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-and-economics1

Energy Return on Investment

EROI = \frac

Thermoeconomics is based on the proposition that the role of

biological evolution Evolution is the change in the heritable characteristics of biological populations over successive generations. It occurs when evolutionary processes such as natural selection and genetic drift act on genetic variation, resulting in certai ...

should be defined and understood not through the

second law of thermodynamics The second law of thermodynamics is a physical law based on Universal (metaphysics), universal empirical observation concerning heat and Energy transformation, energy interconversions. A simple statement of the law is that heat always flows spont ...

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 proce ...

efficiency Efficiency is the often measurable ability to avoid making mistakes or wasting materials, energy, efforts, money, and time while performing a task. In a more general sense, it is the ability to do things well, successfully, and without waste. ...

, 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