Entropy and economic processes - physics perspectives

This paper is a contribution to the discussion on the relation between ther modynamics and economic theory. With respect to thermodynamic constraints o n the economy, there are two diametrically opposite positions in this discu ssion. One claims that the constraints are insignificant ('of no immediate practical importance for modelling') and in the intermediate run, do not li mit economic activity and, therefore, need not be incorporated in the econo mic theory. The other holds that thermodynamics tells us that there are pra ctical limits to materials recycling, which already puts bounds on the econ omy and, therefore, must be included in the economic models. Using the ther modynamic concept of entropy, we show here that there are fundamental probl ems with both positions. Even in the long run. entropy production associate d with material dissipation need not be a limiting factor for economic deve lopment. Abundant energy resources from solar radiation may be used to reco ver dissipated elements. With simple, quantitative analysis we show that th e rate of entropy production caused by human economic activities is very sm all compared to the continuous natural entropy production in the atmosphere and on the Earth's surface. Further, the societal entropy production is we ll within the range of natural variation. It is possible to replace part of the natural entropy production with societal entropy production by making use of solar energy. Society consumes resources otherwise available for com ing generations. However, future generations need not have less resources a vailable to them than the present generation. Human industrial activities c ould be transformed into a sustainable system where the more abundant eleme nts are industrially used and recycled, using solar energy as the driving r esource. An economic theory, fit to guide industrial society in that develo pment, must not disregard thermodynamics nor must it overstate the conseque nces of the laws of thermodynamics. (C) 2001 Elsevier Science B.V. All righ ts reserved.