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Energy, Entropy, Constraints, and Creativity in Economic Growth and Crises

1
Institute for Theoretical Physics und Astrophysics, University of Würzburg, D-97074 Würzburg, Germany
2
Institute of Energy Economics, University of Cologne, D-50827 Cologne, Germany
*
Author to whom correspondence should be addressed.
Received: 29 July 2020 / Revised: 31 August 2020 / Accepted: 30 September 2020 / Published: 14 October 2020
(This article belongs to the Special Issue Three Risky Decades: A Time for Econophysics?)
The neoclassical mainstream theory of economic growth does not care about the First and the Second Law of Thermodynamics. It usually considers only capital and labor as the factors that produce the wealth of modern industrial economies. If energy is taken into account as a factor of production, its economic weight, that is its output elasticity, is assigned a meager magnitude of roughly 5 percent, according to the neoclassical cost-share theorem. Because of that, neoclassical economics has the problems of the “Solow Residual”, which is the big difference between observed and computed economic growth, and of the failure to explain the economic recessions since World War 2 by the variations of the production factors. Having recalled these problems, we point out that technological constraints on factor combinations have been overlooked in the derivation of the cost-share theorem. Biophysical analyses of economic growth that disregard this theorem and mend the neoclassical deficiencies are sketched. They show that energy’s output elasticity is much larger than its cost share and elucidate the existence of bidirectional causality between energy conversion and economic growth. This helps to understand how economic crises have been triggered and overcome by supply-side and demand-side actions. Human creativity changes the state of economic systems. We discuss the challenges to it by the risks from politics and markets in conjunction with energy sources and technologies, and by the constraints that the emissions of particles and heat from entropy production impose on industrial growth in the biosphere. View Full-Text
Keywords: energy; economic growth; output elasticities; entropy production; emissions; optimization energy; economic growth; output elasticities; entropy production; emissions; optimization
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MDPI and ACS Style

Kümmel, R.; Lindenberger, D. Energy, Entropy, Constraints, and Creativity in Economic Growth and Crises. Entropy 2020, 22, 1156. https://0-doi-org.brum.beds.ac.uk/10.3390/e22101156

AMA Style

Kümmel R, Lindenberger D. Energy, Entropy, Constraints, and Creativity in Economic Growth and Crises. Entropy. 2020; 22(10):1156. https://0-doi-org.brum.beds.ac.uk/10.3390/e22101156

Chicago/Turabian Style

Kümmel, Reiner, and Dietmar Lindenberger. 2020. "Energy, Entropy, Constraints, and Creativity in Economic Growth and Crises" Entropy 22, no. 10: 1156. https://0-doi-org.brum.beds.ac.uk/10.3390/e22101156

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