Entropy, Economics, and Policy

Abstract

The laws of thermodynamics constrain transformation of materials and energy, and thus have implications for material and energy use in the economy, for environmental impact, and for policy. This paper provides an overview over the applications of concepts from thermodynamics in economics at the level of individual processes and explores potential constraints at larger system levels – the economy as a whole and the ecosystems within which economies are embedded. Specific emphasis is placed on the ways in which insights from thermodynamics are used to inform economic and policy decision making.