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A thermodynamic analysis of market and planned economies

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  • Soriano, Carles

Abstract

Market and planned economies are considered antagonistic types of material production systems in modern society. Since they are thermodynamic systems, the entropy and energy requirements of each system can be estimated based on its specific characteristics and dynamics. The results show that the entropy and energy requirements of a market economy are much higher than those of a planned economy. This is due to competition for profit, the driving mechanism of market dynamics and self-organization, which is absent in a planned economy. Thus, the entropy and energy needs of a planned economy approach the minimum magnitudes required of a modern economic system that is irreversibly driven to equilibrium with an external reservoir supplying low-entropy energy. Dissipative systems on Earth absorb low-entropy energy from an external source, using it to gain internal order and stability while emitting high-entropy energy. Conversely, a market economy increases its internal entropy during energy exchange with an external reservoir. Large internal entropy in a market economy does not result from summing the entropy of individual capitals. Rather, it results from self-similar dynamics driven by competition for profit, which manifests as larger system property magnitudes.

Suggested Citation

  • Soriano, Carles, 2025. "A thermodynamic analysis of market and planned economies," MPRA Paper 126451, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:126451
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    References listed on IDEAS

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    JEL classification:

    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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