Phillips curve graph, illustrating an
Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of thermodynamics to economic theory. The term "thermoeconomics" was coined in 1962 by American engineer Myron Tribus, Thermoeconomics can be thought of as the statistical physics of economic value.
Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood not through the second law of thermodynamics but in terms of such economic criteria as productivity, efficiency, and especially the costs and benefits (or profitability) of the various mechanisms for capturing and utilizing available energy to build biomass and do work.
Thermoeconomists maintain that human economic systems can be modeled as thermodynamic systems. Then, based on this premise, theoretical economic analogs of the first and second laws of thermodynamics are developed. In addition, the thermodynamic quantity exergy, i.e. measure of the useful work energy of a system, is one measure of value..
Alternately, the existence of thermodynamic correspondences arises directly (i.e., is not a-priori constructed) in bounded-rational potential games in two different ways: from a dynamical equilibrium or from a constrained maximum information-entropy equilibrium,.
Thermoeconomists argue that economic systems always involve matter, energy, entropy, and information. Moreover, the aim of many economic activities is to achieve a certain structure. In this manner, thermoeconomics applies the theories in non-equilibrium thermodynamics, in which structure formations called dissipative structures form, and information theory, in which information entropy is a central construct, to the modeling of economic activities in which the natural flows of energy and materials function to create scarce resources. In thermodynamic terminology, human economic activity may be described as a dissipative system, which flourishes by consuming free energy in transformations and exchange of resources, goods, and services.
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