The Entropy Law and the Economic Process

I am reading Georgescu-Roegen 's mighty work and not at the first time of trying. It is a huge, dense and rich tome, rich in the manner of chocolate mousse but similarly hard to take in large quantities. But this is August and the month when even the over-worked drones of the modern academy can find some time for reading and so I am treating myself to a surfeit of chocolate mousse and will be sharing some select spoonfuls via this blog.

For those who do not know this book or its author it is worth beginning by saying that  Georgescu-Roegen (henceforth GR) was born in Constanta on the Black Sea coast of Romania in 1906. He studied first mathematics and then statistics and economics, on a scholarship to Paris and in London with Karl Pearson. After communism came to Romania he went to the US where he taught economics at Vanderbilt University from 1950 to 1976. We probably know about GR because of the work of his student Herman Daly, who began with a fairly conventional career but seems to have been so influenced by the thought of his heretic teacher that he started taking the biophysical limits seriously and developed, with others, the school of Ecological Economics that is now one of the major critical approaches to the neoclassical hegemony.

I was drawn to the book because, unlike so many economist who began as mathematicians, GR did not remain in the abstract world of numbers and figures, trying to make the systems of life fit into the place statistics had designed for it. Rather his objective was to address the relationship between the biological world and the theorising of economists directly and honestly. Since this task lies at the heart of the interest of a green economist a careful reading of the book is inevitable. However, to challenge the discipline he was so much a part of GR needed to conduct a deep and systematic analysis of how economics worked in the middle of the last century, and it is the outcome of this that the The Entropy Law and the Economic Process presents.

GR begins with a survey of the philosophy of science, as a background to discussing whether economics can ever be a science. Here he draws in many of the philosophical greats, reminding us, for example that it was Kant's view (explained in his wonderfully titled Prolegomena to Any Future Metaphysics that will be Able to Present itself as a Science) that, rather than observing the world and then theorising from our findings, we create our theories and then force our observations to fit them: 'the understanding does not draw its laws (a priori) from nature, but prescribes them to nature' (p. 35).

GR's target, of course, is the early theorists of economics, who sought to transform economics into 'a physico-mathematical science', for example Leon Walras who, when faced with the impossibility of extending the concept of 'utility' this far apparently exclaimed 'Eh bien! This difficulty is not insurmountable. Let us suppose that this measure exists, and we shall be able to give an exact and mathematical account' of the influence of utility on prices and on other economic variables (p. 40). Perhaps it was Walras who was the original inspiration for the joke that asks how many economists it takes to change a light-bulb. The answer is none at all, because they assume that the light-bulb has already been changed.

Jevons was similarly optimistic about the potential of the new sciences and the load-bearing capacity of its concepts. Having declared his intention to rebuild economics as 'the mechanics of utility and self-interest' he waved his hand optimistically at the large quantity of data in account-books and the like as an indication of the nature of economics as a quantitative study, but 'failed to go on to explain how ordinary statistical data could be substituted for the variables of his mechanical equations' (p. 40) GR likens this to 'planning a fish hatchery in a moist flower bed'.

His conclusion on the work of these pioneers of the economic science is damning, his target its misplaced enthusiasm for mechanistic epistemology and for using logic in an inappropriate context: 'For I believe that what social sciences, nay, all sciences need is not so much a new Galileo or a new Newton as a new Aristotle who would prescribe new rules for handling those notions that Logic cannot deal with'.

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Thinking Entropically

As my Christmas gift this festive season I hand you an interesting concept, which has kept me entertained during several recent train journeys. It is the concept of entropy. To understand entropy you need to have a scientific mind, so I am at something of a disadvantage. Here is how a scientific friend of mine, Steve Harris, has helped me explain it:

'Thermodynamics is among the most important topics in science; it studies how energy is exchanged between physical systems as heat and work, resulting in changes in pressure, volume, temperature and entropy, the measure of disorder within a system. The laws of thermodynamics provide some of our most basic understandings of what is physically possible.'

He goes on to explain why the laws of thermodynamics - which explain how our physical universe functions - are of fundamental importance:

'The first law of thermodynamics, also known as the conservation law, states that energy can be neither created nor destroyed, only transformed. However, the second law of thermodynamics—
‘the entropy law’—tells us that in general, the total amount of useful, organized energy available to do work is always declining. For example, a lump of coal is a high-quality, highly organized form of energy; when burned it turns into smoke and heat, which are low-quality, dispersed and much more disordered forms of energy. This process is irreversible; we cannot recapture all the heat and smoke produced by burning and turn it back into a lump of coal. The second law tells us that all energy systems have a tendency to increase their entropy (or degree of disorder) rather than decrease it. This appears to apply to everything in the physical universe. So, although many natural and technological processes do increase order on a local scale—through the growth of plants, say, or the manufacture of goods from raw materials—the material waste and heat produced by these processes steadily, if imperceptibly, increases the general disorder of the physical universe.'

To my unscientific mind this concept is very appealing. My anarcahist inclinations are soothed by the thought that the inherent tendency in the universe is towards chaos, rather than order. The idea of entropy seems intuitively to help explain what is going wrong with our relationship with the planet, and how this relates to our economic activity. It was used in this way by the ecological economists, following up on the work of Nicolae Georgescu-Roegen.

The first law of thermodynamics is about quantity - there is only so much energy in the universe and it can only be changed from one form to another, never created or destroyed. The second law is about the quality of that energy, which changes as its form changes, and with an inherent tendency towards a higher level of entropy, or disorder.

The first economists to consider why our economy was growing out of control and why economists had no concern for the physical limits of the universe soon identified the cause: the pseudo-science of economics pre-dates the discovering of the laws of thermodynamics by some fifty years. Its Promethean optimism about what humans can achieve operates outside physical reality, and has never been brought into line.

There is something intriguing about the relationship between entropy and life itself. Natural processes are able to transcend the movement between disorder and order more creatively than our industrial systems can, an example being the way that nature transforms wastes into life-giving systems, potato peelings into soil, for example. I hope you will be able to do something similarly creative with the concept of entropy itself. It could change your life and could fill a dull moment between meals. Tweet