Geology Reference
In-Depth Information
2.4.5 How is economic thinking related to the Entropy Law and its
recent developments?
Economists uphold two major positions in respect to the Second Law. The majority
believe that whilst this law provides the boundary to all physical actions, it holds
no immediate practical importance to any economic activity and can therefore be
ignored in an economic analysis (Solow, 1997). This mainstream thinking drives the
economy to operate as if waste were a negative externality rather than a source of
valuable secondary resources. There is no generally assumed consciousness regard-
ing the lack of non-renewable resources and subsequently there are no incentives for
generating a fully developed market for recycling. Rather, as waste upsets people,
modern societies have created a myriad of end-of-pipe laws to classify and orderly
dispose it in landfills which gives a dangerous meaning to the expression out of
sight, out of mind. Daly (1992) states: “If recycling dispersed matter was as easy as
finding new resources, then why have even neoclassical economists put the emphasis
on substitution of new resources rather than on recycling of old resources”. Further-
more, according to Christensen (1991), focusing on the circulation of money and
evident environmental externalities, “Neoclassical Economics lacks any representa-
tion of materials, energy sources, physical structures, and time-dependent processes
that are basic to an ecological approach”.
On the contrary, ecological economists advocate the Second Law at the macroe-
conomic scale with the underlying view that a steady-state economy cannot exist
without first considering the law of entropy which places limits on the permissible
scope of economic activities (Daly, 1991). As stated before, the topic “The En-
tropy Law and the Economic Process” by Nicholas Georgescu-Roegen in 1971 was
the first in marking the need for economists approaching Ecology to have a closer
look at Thermodynamics. He put the Second Law (with its related concepts of
irreversibility, degradation and the loss of quality) into the heart of Economics.
However, “entropy” is used qualitatively by ecological economists as a metaphor
in quite an inoperative way. Mayumi (1995) statement that: “the scarcity of mineral
resources establishes a limit on the survival of the human species on this planet” is
typical of ecological economists as its main strength lies not in analytically solving
problems but in detecting them and giving insights into their solution (Faber et al.,
1996). Expressions like “low entropy natural resources are converted into high en-
tropy wastes” are extensively used in the literature as little more than qualitative
explanations, never converted into numbers that could truly evaluate the yearly
destruction of Earth's natural capital.
Yet, even with the lack of objectivity, “one must admit that some things must
be done in spite of the absence of numbers” (Georgescu-Roegen, 1971). Scarcity is
a word commonly used in both Economics and Thermodynamics but Daly (1992)
implicitly admits to having no knowledge on how Thermodynamics can solve the
scarcity problem: “prices measure scarcity relative to wants in the service of opti-
mally allocating a given resource flow among alternative human uses in the present
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