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The Notion of Entropy in an Economic Analysis: the Classical Examples and New Perspectives

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  • Vozna Liudmyla Yu.

    (Ph. D. in economics, Independent researcher, Ukraine (Italy))

Abstract

This article deals with the notion of entropy in its applicability to economics. Briefly, it regards some classical cases of such a use as the labour concept of Podolinsky and the bioeconomics of Georgescu-Roegen. This article also attempts to apply the concept of entropy to the analysis of market structures in the example of the perfect competition model. Thus, the article asserts that if we compare different entropy concepts with the main characteristics of a market with perfect competition, we must conclude that the latter is a structure with the maximum level of entropy. But maximum entropy means the system’s death. So, as a system, a perfectly competitive market cannot exist. Despite economists recognise the unreality of such a market from an empirical point of view, the application of the entropy concept helps us to repeat this approval also as a methodological one. The use of the entropy concept as a methodological instrument helps to question some other economic models, too.

Suggested Citation

  • Vozna Liudmyla Yu., 2016. "The Notion of Entropy in an Economic Analysis: the Classical Examples and New Perspectives," Journal of Heterodox Economics, Sciendo, vol. 3(1), pages 1-16, June.
    • Handle: RePEc:vrs:joheec:v:3:y:2016:i:1:p:1-16:n:1
    DOI: 10.1515/jheec-2016-0001
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    References listed on IDEAS

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    1. Giuseppe Munda, 2016. "Beyond welfare economics: some methodological issues," Journal of Economic Methodology, Taylor & Francis Journals, vol. 23(2), pages 185-202, June.
    2. 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.
    3. G. J. Stigler, 1972. "Perfect Competition, Historically Contemplated," Palgrave Macmillan Books, in: Charles K. Rowley (ed.), Readings in Industrial Economics, chapter 7, pages 105-130, Palgrave Macmillan.
    4. Nicholas Georgescu-Roegen, 1986. "The Entropy Law and the Economic Process in Retrospect," Eastern Economic Journal, Eastern Economic Association, vol. 12(1), pages 3-25, Jan-Mar.
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    Cited by:

    1. Maria Cerreta & Gaia Daldanise & Eleonora Giovene di Girasole & Carmelo Maria Torre, 2021. "A Cultural Heritage Low Entropy Enhancement Approach: An Ex Post Evaluation of Creative Practices," Sustainability, MDPI, vol. 13(5), pages 1-22, March.
    2. Moriah B. Bostian & Cinzia Daraio & Rolf Fare & Shawna Grosskopf & Maria Grazia Izzo & Luca Leuzzi & Giancarlo Ruocco & William L. Weber, 2018. "Inference for Nonparametric Productivity Networks: A Pseudo-likelihood Approach," DIAG Technical Reports 2018-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    3. Anna Horodecka & Liudmyla Vozna, 2018. "Wage inequality and macroeconomic stability: a synergetic approach," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 17(3), pages 265-277, September.

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    More about this item

    Keywords

    entropy; the second law of thermodynamics; uncertainty; market structure; perfect competition; disorder;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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