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Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of statistical mechanics to economic theory. [1] Thermoeconomics can be thought of as the statistical physics of economic value [2] 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. [3]


"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 systems can be modeled as thermodynamic systems. Thermoeconomists argue that economic systems always involve matter, energy, entropy, and information. [4] [5] Then, based on this premise, theoretical economic analogs of the first and second laws of thermodynamics are developed. [6] 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. [1] 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. [7] [8]

A comprehensive and accurate model of how real economic systems work. Energy-and-economics1.png
A comprehensive and accurate model of how real economic systems work.

Energy Return on Investment

Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood not through the second law of thermodynamics 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. [9] [10] [ dubious ]

Quality EROI Balloon graph representing quality EROI.png
Quality EROI

Peak Oil

Current US/Global Oil/Energy situation Current U.S. and Global Oil,Energy Situation.jpg
Current US/Global Oil/Energy situation

Political Implications

"[T]he 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." [11]

Energy Backed Credit

Under this analysis, a reduction of GDP in advanced economies is now likely:

  1. when we can no longer access consumption via adding credit, and
  2. 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. [12]

See also

Related Research Articles

<span class="mw-page-title-main">Entropy</span> Property of a thermodynamic system

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 thermodynamics, where it was first recognized, to the microscopic description of nature in statistical physics, and to the principles of information theory. It has found far-ranging applications in chemistry and physics, in biological systems and their relation to life, in cosmology, economics, sociology, weather science, climate change, and information systems including the transmission of information in telecommunication.

<span class="mw-page-title-main">Pessimism</span> Negative mental attitude

Pessimism is a negative mental attitude in which an undesirable outcome is anticipated from a given situation. Pessimists tend to focus on the negatives of life in general. A common question asked to test for pessimism is "Is the glass half empty or half full?"; in this situation, a pessimist is said to see the glass as half empty, while an optimist is said to see the glass as half full. Throughout history, the pessimistic disposition has had effects on all major areas of thinking.

<span class="mw-page-title-main">Thermodynamics</span> Physics of heat, work, and temperature

Thermodynamics is a branch of physics that deals with heat, work, and temperature, and their relation to energy, entropy, and the physical properties of matter and radiation. The behavior of these quantities is governed by the four laws of thermodynamics which convey a quantitative description using measurable macroscopic physical quantities, but may be explained in terms of microscopic constituents by statistical mechanics. Thermodynamics applies to a wide variety of topics in science and engineering, especially physical chemistry, biochemistry, chemical engineering and mechanical engineering, but also in other complex fields such as meteorology.

<span class="mw-page-title-main">Ecological economics</span> Interdependence of human economies and natural ecosystems

Ecological economics, bioeconomics, ecolonomy, eco-economics, or ecol-econ is both a transdisciplinary and an interdisciplinary field of academic research addressing the interdependence and coevolution of human economies and natural ecosystems, both intertemporally and spatially. By treating the economy as a subsystem of Earth's larger ecosystem, and by emphasizing the preservation of natural capital, the field of ecological economics is differentiated from environmental economics, which is the mainstream economic analysis of the environment. One survey of German economists found that ecological and environmental economics are different schools of economic thought, with ecological economists emphasizing strong sustainability and rejecting the proposition that physical (human-made) capital can substitute for natural capital.

<span class="mw-page-title-main">Non-equilibrium thermodynamics</span> Branch of 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 that represent an extrapolation of the variables used to specify the system in thermodynamic equilibrium. Non-equilibrium thermodynamics is concerned with transport processes and with the rates of chemical reactions.

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 dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics. Econophysics is closely related to social physics.

<span class="mw-page-title-main">Herman Daly</span> American economist (1938–2022)

Herman Edward Daly was an American ecological and Georgist economist and professor at the School of Public Policy of University of Maryland, College Park in the United States, best known for his time as a senior economist at the World Bank from 1988 to 1994. In 1996, he was awarded the Right Livelihood Award for "defining a path of ecological economics that integrates the key elements of ethics, quality of life, environment and community."

<span class="mw-page-title-main">Steady-state economy</span> Constant capital and population size

A steady-state economy is an economy made up of a constant stock of physical wealth (capital) and a constant population size. In effect, such an economy does not grow in the course of time. The term usually refers to the national economy of a particular country, but it is also applicable to the economic system of a city, a region, or the entire world. Early in the history of economic thought, classical economist Adam Smith of the 18th century developed the concept of a stationary state of an economy: Smith believed that any national economy in the world would sooner or later settle in a final state of stationarity.

<span class="mw-page-title-main">Heterodox economics</span> Economic theories that contrast with orthodox schools of economic thought

Heterodox economics is any economic thought or theory that contrasts with orthodox schools of economic thought, or that may be beyond neoclassical economics. These include institutional, evolutionary, feminist, social, post-Keynesian, ecological, Austrian, complexity, Marxian, socialist, and anarchist economics.

Biological thermodynamics is the quantitative study of the energy transductions that occur in or between living organisms, structures, and cells and of the nature and function of the chemical processes underlying these transductions. Biological thermodynamics may address the question of whether the benefit associated with any particular phenotypic trait is worth the energy investment it requires.

Ecodynamics is a part of applied economics. It covers knowledge on monetary value, the usage of money, and the money flow. It deals with labor, and capital.

<span class="mw-page-title-main">Energy quality</span>

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 free energy, and therefore a high proportion of it can be converted to work; whereas with low quality forms of energy, only a small proportion can be converted to work, and the remainder is dissipated as heat. The concept of energy quality is also used in ecology, where it is used to track the flow of energy between different trophic levels in a food chain and in thermoeconomics, where it is used as a measure of economic output per unit of energy. Methods of evaluating energy quality often involve developing a ranking of energy qualities in hierarchical order.

<span class="mw-page-title-main">Robert Ayres (scientist)</span>

Robert Underwood Ayres is an American-born physicist and economist. His career has focused on the application of physical ideas, especially the laws of thermodynamics, to economics; a long-standing pioneering interest in material flows and transformations —a concept which he originated. His most recent work challenges the widely held economic theory of growth.

<span class="mw-page-title-main">Nicholas Georgescu-Roegen</span> Romanian mathematician, statistician and economist (1906–1994)

Nicholas Georgescu-Roegen 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 argued that all natural resources are irreversibly degraded when put to use in economic activity. A progenitor and a paradigm founder in economics, Georgescu-Roegen's work was decisive for the establishing of ecological economics as an independent academic sub-discipline in economics.

Charles A. S. Hall is an American systems ecologist and ESF Foundation Distinguished Professor at State University of New York in the College of Environmental Science & Forestry.

Eric Zencey was an American author, and lecturer at the University of Vermont in Burlington, Vermont and Washington University in St. Louis.

Degrowth is a term used for both a political, economic, and social movement as well as a set of theories that critique the paradigm of economic growth. It can be described as an extensive framework that is based on critiques of the growth-centered economic system in which we are living. Degrowth is based on ideas from a diverse range of lines of thought such as political ecology, ecological economics, feminist political ecology, and environmental justice, pointing out the social and ecological harm caused by the pursuit of infinite growth and Western "development" imperatives.

Bioeconomics may refer to:

Mauro Bonaiuti, PhD, teaches Ecological economics on the Master's on Socio-Environmental Sustainability and Solidarity Economy and Sustainability programme at the University of Turin. He is co-founder of the Italian Degrowth Association and among the promoters of the Italian Solidarity Economy Network.

Vladimir Nikolajevich Pokrovskii is a Russian scientist known for his original contributions to polymer physics and economic theory. He was the founder of the Altai school of dynamics of nonlinear fluids.


  1. 1 2 Sieniutycz, Stanislaw; Salamon, Peter (1990). Finite-Time Thermodynamics and Thermoeconomics. Taylor & Francis. ISBN   0-8448-1668-X.
  2. Chen, Jing (2005). The Physical Foundation of Economics - an Analytical Thermodynamic Theory. World Scientific. ISBN   981-256-323-7.
  3. "What is biophysical economics?". BiophysEco. 2017-01-23. Retrieved 2022-09-28.
  4. Baumgarter, Stefan. (2004). Thermodynamic Models, Modeling in Ecological Economics (Ch. 18) Archived 2009-03-25 at the Wayback Machine
  5. Pokrovskii, Vladimir (2020). Thermodynamics of Complex Systems: Principles and applications. IOP Publishing, Bristol, UK.
  6. Burley, Peter; Foster, John (1994). Economics and Thermodynamics – New Perspectives on Economic Analysis. Kluwer Academic Publishers. ISBN   0-7923-9446-1.
  7. Raine, Alan; Foster, John; Potts, Jason (2006). "The new entropy law and the economic process". Ecological Complexity. 3 (4): 354–360. doi:10.1016/j.ecocom.2007.02.009.
  8. Annila, A. and Salthe, S., Arto; Salthe, Stanley (2009). "Economies evolve by energy dispersal". Entropy. 11 (4): 606–633. Bibcode:2009Entrp..11..606A. doi: 10.3390/e11040606 .{{cite journal}}: CS1 maint: multiple names: authors list (link)
  9. Peter A. Corning 1*, Stephen J. Kline. (2000). Thermodynamics, information and life revisited, Part II: Thermoeconomics and Control information Systems Research and Behavioral Science, Apr. 07, Volume 15, Issue 6 , Pages 453 – 482
  10. Corning, P. (2002). "Thermoeconomics – Beyond the Second Law Archived 2008-09-22 at the Wayback Machine "
  11. Ahmed, Nafeez Mosaddeq (2017). Failing states, collapsing systems : biophysical triggers of political violence. Cham, Switzerland: Springer. ISBN   978-3-319-47816-6. OCLC   965142394.
  12. Hagens, N. J. (2020-03-01). "Economics for the future – Beyond the superorganism". Ecological Economics. 169: 106520. doi: 10.1016/j.ecolecon.2019.106520 . ISSN   0921-8009. S2CID   212882790.

Further reading