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Time horizons and electricity futures: An application of Nicholas Georgescu-Roegen's general theory of economic production

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  • Farrell, Katharine N.
  • Mayumi, Kozo

Abstract

This paper reports theoretical economic production work and uses electricity futures trading to illustrate its argument. The focus is relationships between time, production and tradition both in Nicholas Georgescu-Roegen's analytical representation of the production process (i.e., flow/fund model) and in his dialectical scheme dealing with the evolutionary changes in the economic process. Our main arguments are (1) the flow/fund model is designed to be employed in conjunction with attention to how the boundaries of a given process are determined and (2) process boundaries are dialectical distinctions—between process and not-process—that are strongly related to time and tradition. We propose that Georgescu-Roegen's The Entropy Law and the Economic Process is best understood as the elaboration of a general theory of economic production and we developed two conceptual tools (time ▪ and meta-funds), both of which are related to the dialectical distinction between process and not-process, which we use to operationalise this general theory. Finally, we demonstrate that, although trading in electricity futures is surprising if one uses a stock/flow vs services distinction (because electricity supply is classed as a service) it appears perfectly logical under Georgescu-Roegen's general theory: shortening time horizons, combined with a shift in the relationship between raw fuel supplies and power production procedures, lead to a shift in the status of electricity supply, from fund to flow.

Suggested Citation

  • Farrell, Katharine N. & Mayumi, Kozo, 2009. "Time horizons and electricity futures: An application of Nicholas Georgescu-Roegen's general theory of economic production," Energy, Elsevier, vol. 34(3), pages 301-307.
    • Handle: RePEc:eee:energy:v:34:y:2009:i:3:p:301-307
    DOI: 10.1016/j.energy.2008.07.002
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    References listed on IDEAS

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    1. Nicholas Georgescu-Roegen, 1979. "Methods in Economic Science," Journal of Economic Issues, Taylor & Francis Journals, vol. 13(2), pages 317-328, June.
    2. Kozo Mayumi & John M. Gowdy (ed.), 1999. "Bioeconomics and Sustainability," Books, Edward Elgar Publishing, number 1347.
    3. John Gowdy & Susan Mesner, 1998. "The Evolution of Georgescu-Roegen's Bioeconomics," Review of Social Economy, Taylor & Francis Journals, vol. 56(2), pages 136-156.
    4. Maneschi, Andrea & Zamagni, Stefano, 1997. "Nicholas Georgescu-Roegen, 1906-1994," Economic Journal, Royal Economic Society, vol. 107(442), pages 695-707, May.
    5. Nicholas Georgescu-Roegen, 1950. "The Theory of Choice and the Constancy of Economic Laws," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(1), pages 125-138.
    6. N. Georgescu-Roegen, 1935. "Fixed Coefficients of Production and the Marginal Productivity Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 3(1), pages 40-49.
    7. Mayumi, Kozo & Solomon, Barry D. & Chang, Jason, 2005. "The ecological and consumption themes of the films of Hayao Miyazaki," Ecological Economics, Elsevier, vol. 54(1), pages 1-7, July.
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    4. Couix, Quentin, 2020. "Georgescu-Roegen's Flow-Fund Theory of Production in Retrospect," Ecological Economics, Elsevier, vol. 176(C).
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    6. Jose Silva-Macher & Katharine Farrell, 2014. "The flow/fund model of Conga: exploring the anatomy of environmental conflicts at the Andes–Amazon commodity frontier," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(3), pages 747-768, June.
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    8. Farrell, Katharine N. & Silva-Macher, Jose Carlos, 2017. "Exploring Futures for Amazonia's Sierra del Divisor: An Environmental Valuation Triadics Approach to Analyzing Ecological Economic Decision Choices in the Context of Major Shifts in Boundary Condition," Ecological Economics, Elsevier, vol. 141(C), pages 166-179.

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