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A Thermodynamic Theory of Economics

Author

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  • John Bryant

    (Vocat International)

Abstract

An analogy between thermodynamic and economic theories and processes is developed further, following a previous paper published by the author in 1982. Economic equivalents are set out concerning the ideal gas equation, the gas constant, pressure, temperature, entropy, work done, specific heat and the 1st and 2nd Laws of Thermodynamics. The law of diminishing marginal utility was derived from thermodynamic first principles. Conditions are set out concerning the relationship of economic processes to entropic gain. A link between the Le Chatelier principle and economic processes is developed, culminating in a derivation of an equation similar in format to that of Cobb Douglas production function, but with an equilibrium constant and a disequilibrium function added to it. A trade cycle is constructed, utilising thermodynamic processes, and equations are derived for cycle efficiency, growth and entropy gain. A thermodynamic model of a money system is set out, and an attempt is made to relate interest rates, the rate of return, money demand and the velocity of circulation to entropy gain. Aspects concerning the measurement of economic value in thermodynamic terms are discussed.

Suggested Citation

  • John Bryant, 2007. "A Thermodynamic Theory of Economics," Working Papers tefprv2007, Economic Consultancy, Vocat International.
    • Handle: RePEc:voc:wpaper:tefprv2007
    as

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    File URL: http://www.vocat.co.uk/TEFPRV2007.pdf
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    References listed on IDEAS

    as
    1. Bryant, J., 1982. "A thermodynamic approach to economics," Energy Economics, Elsevier, vol. 4(1), pages 36-50, January.
    2. Geoffrey P. Hammond, 2004. "Engineering Sustainability: Thermodynamics, Energy Systems and the Environment," Palgrave Macmillan Books, in: Adrian Winnett (ed.), Towards an Environment Research Agenda, chapter 8, pages 175-210, Palgrave Macmillan.
    3. Geoffrey P. Hammond & Adrian B. Winnett, 2004. "Some Interdisciplinary Perspectives on Environmental Appraisal and Valuation," Palgrave Macmillan Books, in: Adrian Winnett (ed.), Towards an Environment Research Agenda, chapter 1, pages 3-33, Palgrave Macmillan.
    4. Sousa, Tania & Domingos, Tiago, 2006. "Is neoclassical microeconomics formally valid? An approach based on an analogy with equilibrium thermodynamics," Ecological Economics, Elsevier, vol. 58(1), pages 160-169, June.
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    Cited by:

    1. repec:voc:wpaper:tech52012 is not listed on IDEAS
    2. repec:voc:wpaper:tech82012 is not listed on IDEAS
    3. John Bryant, 2008. "Thermodynamics and the Economic Process," Working Papers ten62008, Economic Consultancy, Vocat International.
    4. repec:voc:wpaper:tech32012 is not listed on IDEAS
    5. John Bryant, 2010. "A Thermodynamic Approach to Monetary Economics. A Revision. An application to the UK Economy 1969-2006 and the USA Economy 1966-2006," Working Papers ten5a2010, Economic Consultancy, Vocat International.
    6. repec:voc:wpaper:tech72012 is not listed on IDEAS
    7. Jing Chen, 2013. "Population, Migration, Living Standard and Social Pressure: A Modeling Approach from Thermodynamics," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 11(3), pages 345-349.
    8. repec:voc:wpaper:tech22012 is not listed on IDEAS
    9. repec:voc:wpaper:tech12012 is not listed on IDEAS
    10. repec:voc:wpaper:tech62012 is not listed on IDEAS
    11. repec:voc:wpaper:tech92012 is not listed on IDEAS
    12. George, Michael, 2007. "Predicting the Profit Potential of a Microeconomic Process: An Information Theoretic/Thermodynamic Approach," MPRA Paper 4816, University Library of Munich, Germany.
    13. repec:voc:wpaper:tech42012 is not listed on IDEAS

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    More about this item

    Keywords

    Thermodynamics; economics; Le Chatelier; entropy; utility; money; equilibrium; value; energy;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • E - Macroeconomics and Monetary Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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