IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Physical energy cost serves as the "invisible hand" governing economic valuation: Direct evidence from biogeochemical data and the U.S. metal market

Listed author(s):
  • Liu, Zhicen
  • Koerwer, Joel
  • Nemoto, Jiro
  • Imura, Hidefumi
Registered author(s):

    Energy supply is mandatory for the production of economic value. Nevertheless, tradition dictates that an enigmatic "invisible hand" governs economic valuation. Physical scientists have long proposed alternative but testable energy cost theories of economic valuation, and have shown the gross correlation between energy consumption and economic output at the national level through input-output energy analysis. However, due to the difficulty of precise energy analysis and highly complicated real markets, no decisive evidence directly linking energy costs to the selling prices of individual commodities has yet been found. Over the past century, the US metal market has accumulated a huge body of price data, which for the first time ever provides us the opportunity to quantitatively examine the direct energy-value correlation. Here, by analyzing the market price data of 65 purified chemical elements (mainly metals) relative to the total energy consumption for refining them from naturally occurring geochemical conditions, we found a clear correlation between the energy cost and their market prices. The underlying physics we proposed has compatibility with conventional economic concepts such as the ratio between supply and demand or scarcity's role in economic valuation. It demonstrates how energy cost serves as the "invisible hand" governing economic valuation. Thorough understanding of this energy connection between the human economic and the Earth's biogeochemical metabolism is essential for improving the overall energy efficiency and furthermore the sustainability of the human society.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 67 (2008)
    Issue (Month): 1 (August)
    Pages: 104-108

    in new window

    Handle: RePEc:eee:ecolec:v:67:y:2008:i:1:p:104-108
    Contact details of provider: Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Ayres, Robert U., 1998. "Eco-thermodynamics: economics and the second law," Ecological Economics, Elsevier, vol. 26(2), pages 189-209, August.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:67:y:2008:i:1:p:104-108. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.