Aplicacion de La Termodinamica a La Economia

7/30/2019 Aplicacion de La Termodinamica a La Economia

1/107Electronic copy available at: http://ssrn.com/abstract=969980Electronic copy available at: http://ssrn.com/abstract=969980Electronic copy of this paper is available at: http://ssrn.com/abstract=969980

Application of the Main Laws of

Thermodynamics on the Economy

. Jrgen Bennewitz1)

Abstract

The main laws of thermodynamics are explained with respect to economics. Ex-pressions like entropy, exergy, anergy, inner energy and free energy of economicsystems are defined qualitatively as well as quantitatively. The first and second laware quantitatively deducted for their application in the economy. The quantity en-tropy is treated very thoroughly and it is shown that the entropy increase of eco-nomic systems is directly proportional th the value added. Entropy, free energy andinner energy are the most regulating factors of economic processes. It is shownquantitatively on the basis of realistic company data what the outcome of a merger

of two companies can be. The appendix shows the details of an entropy tax whichcould be very much of interest solving environment problems as for instance the se-rious climate problem.

Keywords: Laws of thermodynamics in the economy, entropy and economy,inner energy and economy, free energy and economy, proportionalityof energy and money, quantitative treatment of merger processes,entropy tax.

JEL Classification: A1, A12, C0, F0, G3, G34.

1 Jrgen Bennewitz, E-Mail : [email protected]


2/107Electronic copy available at: http://ssrn.com/abstract=969980Electronic copy available at: http://ssrn.com/abstract=969980Electronic copy of this paper is available at: http://ssrn.com/abstract=969980

2

Contents Page

Preface 3

1. Introduction 9

2. General Remarks2.1 Systems of Ecodynamic 152.2 Energy Types in Ecodynamic 182.3 State Functions in Ecodynamic 21

3. The Laws of Thermodynamic and Ecodynamic3.1 The Zeroth Law 243.2 The First Law

3.2.1 Exergy and Anergy in Ecodynamic Systems 253.2.2 General Treatment of the First Law 273.2.3 Quantitative Treatment of the First Law 32

3.3 The Second Law3.3.1 General Treatment of the Second Law 423.3.2 Quantitative Treatment 1 of the Second Law 453.3.3 Quantitative Treatment 2 of the Second Law 503.3.4 Quantitative Treatment 3 of the Second Law 563.3.5 Exergy, Anergy and the Second Law 61

3.4. The Properties of 64

4. Free Energy of Ecodynamic Systems 71

5. Ecodynamics of binary Economic Systems5.1 Basics 755.2 Inner Energy of binary Economic Systems 785.3 Entropy of binary Economic Systems 815.4 Free Energy of Economic Systems 845.5 Example: Calculation of a Merger 89

6. Appendix: Entropy Tax 94

Formula-Symbols and Constants 100Glossary 102Literature 105


3/107Electronic copy available at: http://ssrn.com/abstract=969980

3

Preface

Why was this monograph ever written?

The answer to this question is very simple: I am worried about the future of our married

children and grand children; I am worried about the future of mankind. Why I am worried?This I will sketch in the following. Every paragraph would be a book in itself if elaboratedin detail! This study shall be my part to work for a better future.

1. Problems of Survival

I think and I believe if we, the present generation and the next one are not able or willing tosolve the problems I shall list only with catchwords and by no means complete, we will nothave too much hope for a good living of future generations. This study is actually the des-perate attempt of someone who thinks to know where mankind is going to end, to be of just

a little assistance for solving our problems. Here is what worries me:

The law of entropy dictates the direction of everything that happens in our world. Every-thing depends on the law of Entropy, which is the law of irreversibility, too. Our time is ir-reversible the same way as the transfer of useful energy in unuseful energy is irreversible.This irreversibility of all of our doing is probably one of the main problems for us to un-derstand what goes on in this world.

Unsolved is the problem of the expansion of the world population. By the middle of thiscentury we will have almost 10 billion people living on earth. The mass will not be in theindustrialized countries but in Africa, India, South America, Indonesia, and China. Notfar from 5 billion of them will be below the age of thirty years. Theoretically they couldoverrun the industrialized nations. Theoretically?

Will the so-called less developed countries be able to solve their problems by themselves?Do they have the knowledge and the means to do it? I think the answer is a simple no. Is itpossible to cut short a cultural and scientific development of 10 thousand years, as we ex-perienced in our so called developed countries compared with people of the Congo, whojust had only two or three or even four generation for such a development? These peoplethere can use a Kalaschnikoff, but they cannot calculate the area of a square, they cannotdevelop the agricultural methods or means to feed themselves, with their increasing num-

ber, just by themselves. Everything that is done in all these mentioned regions in the way itis done today will only increase the entropy of the world by irrevocably decreasing thechances for a living tomorrow, simultaneously.

One hundred years ago we had 5 cities on the globe with more than one million people liv-ing there. Now we have probably more than 500 cities with more than 1 million people.The UN says that before 2010 about half of the world population will live in cities. Thiswould be more than 4 billion people! Probably 80 % of them will live in mega million cit-ies. The slums will increase but not decrease.

Our present world economy is almost a disaster, how can this economy solve the problems,

which arise in front of our eyes if we go on like we do now? The whole development, as itlooks today, will be an uncontrolled dramatic increase of entropy, irreversible, irrevocable.


4/107

4

What will be the consequences of our ecological problems like pollution of our environ-ment, green house effect, exploitation of tropical woods, etc. for the development of theentropy? Only the green house effect will probably have disastrously consequences on ourclimate. The limits of water supplies are reached in many countries, clean drinking waterwill become a rarity for more and more people. The production of food will probably not

keep up with the increase of the world population. In any case we will have a Chain ofEntropy Increase caused by increasing amounts of fertilizers and increasing machinery forfarming, increasing food manufacturing, increasing transportation etc. Can we really feed10 billion people on earth when we also destroy our resources of fish in the oceans? An-other problem is the degradation of farmland. Today the world depends to a large extent onthe food production of the USA. In the under-developed countries the food production doesnot keep pace with the increase of the population. Where we look at, everything requiresmore and more energy and therefore results in an increase of entropy.

The polarization of the poor and the rich has increased during the last decades. The gap be-tween the industrialized and the less-developed countries has almost tripled within the last

50 years and it seems to increase further. The net-value of the about 360 richest people ofthe world corresponds to the capital property of about 2,3 billion people of the poor. Theso-called equality of chances turns out to be a game in which only very few win and themasses are asked to be good loser. But the few are the ones responsible for the increase ofentropy not the losers.

Who has not enough knowledge, who has no chances to get some education or to learn aprofession has no chance for a job in our reckless world. Are the abilities of workers get-ting better with an increasing income or is the carousel of the ever-increasing income (forsome?) just the carousel of increasing entropy? Two thirds of the analphabets on earth arewomen! And where and what is the positive influence of the media (TV) on education?How does the number of scientists in the industrialized countries compare with the numberof scientists in the less-developed countries? How many scientists have lived in the worldlet say around 1800 and how many have been there in 2000? In 1800 there were about 1,2Billion people living on earth in 2000 we had already 6 billions. Let it be a few hundredthousand scientists in 1800, today there will be many millions. And what is the result of allthe gain of knowledge except for a tremendous increase in entropy? Does this increase runsparallel to the increase in the standard of living etc.? It certainly does not. The increase ofentropy is exponential. One of many other reasons for this is that special scientists createthe desire of man for more goods than are necessary for life. The bad education and thestupidity of the mass of man is very dangerous, even for the entropy development.

Is the economic growth as postulated all the time really necessary? A certain growth mustsurely be, just because of the growing population and the necessary shift from poor to lesspoor at least. Although we dont see to much success in this respect. But the remainingeconomic growth looks very much like one with the aim just to increase luxury. The dis-parity of this growth between the rich and the poor countries increases. A very seriousquestion that is postulated by the UN is that human development depends only upon theeconomic growth. I would say it depends not on growth as defined in the economy but onthe economic developmentof the respective areas. Economic growth as a method minimiz-ing excessive indebtedness of households and minimizing unemployment has as a first eco-nomic consequence an increase of entropy with the result of damaging the economy

because of destroying valuable resources by a transfer into anergy. It is a question if thehigh-income countries really need further economic growth. Where shall this end? Is thisthinking based on a sound knowledge or on faith? If one thinks it is faith then it looks like


5/107

5

mistaken belief. In any case, this belief underestimates the importance of entropy in ourlife. It is also a serious question if the rich really want to give something to the poor and tolet them participate. It looks that this is only as long the case as it brings a profit to the rich.In the less developed countries the population raises faster than the vacant workplaces, thenumber of young people exceeds the number of the old. This is a dangerous development

with the result that in these countries the young work in the so-called informal sector andin households. No one really knows who is unemployed and what is the definition of un-employment in the various countries. It looks that the promotion of capital-intensive indus-tries in the poorer countries has just positive results only for the provider of the capital butprobably a negative result on the rate of employment in these countries.

According to the UN it is a fact that about 1,5 billion people in the developed countrieshave had an increase of income of about 7 % per annum in the 80 th (i.e. doubling the in-come in 10 years) while more than one billion people in this world have had a considerabledecrease in income within these 10 years. In the last 35 years, the world trade of goods hastripled but the worlds service volume increased by a factor of 14! Since 1990, the former

socialistic countries had practically a decrease in the per capita income regardless of theincrease in expenditures in military investments. The world production has increased dur-ing the last hundred years by a factor of 11, while the population only increased by a fac-tor of 3.5. A tremendous increase of entropy all over the world but no solutions of theproblems of this world, thats what it looks like.

If we have a short look at the World Bank and the IWF, it is without question that these in-stitutions have had many positive results with their work. Other results were less positiveand many of them can be related to the catchwords of the foregoing paragraphs. Many ofthe investments resulted in a higher increase of entropy than probably necessary. The inter-est in projects that cost money but dont bring a good return on investment, like for healthor education, is rather limited. However, these are the projects, which would pay off on thelonger run; these would be the projects to bring down the increase of entropy to a reason-able level.

The BSP, the gross national product, is called to be the measure of the measures. Is that so?It is certainly not a measure of the necessary increase of entropy for a sound economic de-velopment.

One of the main sources of unnecessary products is still the military expenditure. If onelooks in this connection at the undeveloped countries which export military goods while

their citizens almost starve or have only very restricted access to goods which are in othercountries nothing special then one can only shake the head about this military money mak-ing in general. This is really energy dissipation and excessive entropy generation.

Recycling is another subject one should look at closely to find out where it is economicallyreasonable and where not. Just looking at the final recycling process does not do it but it isnecessary to check the energy balance of the whole process from collecting in a householdor a factory up to the distribution of the recycled product. There are many question marksand the unnecessary entropy production looks rather high in this field.

We shall close this row of catchwords with a few remarks on the general energy supply of

our world. There is no question that our fossil resources coal, oil and gas - will get to anend sometime in the future. If this will be in 25, 50, or 75 years that is not the point. Thepoint is that this point will come, irrevocably, and by all probability before the end of this


6/107

6

century, maybe even long before the end of this century. This will be the case even withmuch more forced expansions of the renewable energy resources like wind, sun and water.They cannot fill the gap, which is left by the fossil energies. That this is impossible can beshown easily by physical calculations. Just only two other examples where the renewableenergies wont help at all: First, almost all of our pharmaceutics are based on coal, oil or

gas. Chemically the only way to get them. Second: Our clothing is made to a large extentof coal, oil and gas. The sheep of Australia or the Faeroe Isle or the cotton harvested onthe world wont do it for 10 billion people. If in connection with the energy question, somepoliticians of certain political parties request a minimum of one million years for safelystoring radioactive wastes it is breathtaking. If we go on like we do presently there will benothing for heating or cooling our houses or even our bodies in much less than 1000 years,maybe less than 500 or even less than 100 years.

How can we solve all those overwhelming problems we have only sketched? To answerthis fundamental question we have to acknowledge that the thoughts of this study could beonly a grain of a mass of necessary grains of measures but an very important grain!

2. Entropy Identity

Question: Is it possible that we can arrive at a world society that is entropy cautious?Answer: Yes it can be possible - but we all have to change our thinking: The UN, the gov-ernments, the politicians and finally everyone who is living on this planet and who thinksresponsible of his children, grandchildren and grand-grand-children. We have to think overour democratic rules and our personal behaviour. It is probably a very hard way we have togo, and probably not always a very pleasant one. However, there is no way out, to solveour climate problem, our energy problem our problem to survive.

Every human being is asked to identify himself with the problem that our future life de-pends basically on the task to reduce the increase of entropy to the smallest possible butnecessary amount. This requires making this problem understandable to practically every-body. We have to find the means to develop an entropy identity as a basis to understand theproblem and to work on its solution. We have to find the technical and the psychologicaltools to explain the entropy problem first and than transfer it in an entropy identity. Thiswill be a tremendous task. However, would be it not a thankful task better than fightingwars or being drowned in luxury etc.? It would be a task where we could solve very manyof the problems along the road as sketched before.

For this we have to direct our doing to an identification with the problem. The entropyproblem must be explained in a way that everyone who is willing could understand it. Wehave to make it clear that we are not doomed if we tackle the entropy question and definean aim to strive for. Only then the entropy problem will be accepted as such and an entropyidentity can develop in time, but certainly not until to tomorrow. I think that this should beThe Task of world politics, of the UN, of all responsible politicians in this world independ-ent of boundaries between countries, independent of languages, independent of colour.

To solve the entropy problem would take so much time that there would be not a secondleft to fight wars. But in the first place, we have to convince some billions of people. I


7/107

7

hope that not already the very first of all steps i.e. to convince the scientists and experts ofeconomy of this study will be unattainable.

3. My Own Position

During the first 20 years of my professional life, my work since 1946 shifted from sole sci-ence gradually to management, first technical management then later more and more gen-eral management. But I kept always two fields of interest within my reach. These were andare general questions of the world energy supply and the field of thermodynamics that wasalready my favourite subject as a student of chemistry and later of physical metallurgy.Becoming more and more a manager I had to learn economy from the ground level of bookkeeping and financing, how to organize companies up to questions of sales. Alreadyaround 1970 I asked myself if there are any possible connections between the questions ofeconomy and the science of physics and thermodynamics. Soon I concentrated on lookingfor connections between thermodynamics and economy. Looking through my early notes I

found an unpublished paper (1977) with the title The free Enthalpy of Industrial Compa-nies, which contained one unsolved problem: I did not know what to do with the thermo-dynamic temperature. I was convinced that with the quantity temperature there was no wayto arrive at a closed logical system of economy and thermodynamics. It took me about 10more years to find the solution to this problem as shown in this study.

Then I had another problem, which I still consider as a very serious one. I tried during thepast 15 years to get contacts with scientists in the field of the economy. It was annoyingand frustrating. I finally gave up more or less. I have tried to contact more than a hundredinstitutes, professors and so on. In more than 50 per cent I even did not get any answer atall, some times just a confirmation of the reception of my letter or a note of no interest. Ihad one very interesting and intensive discussion with an outstanding and very well knownscientist of economics. In this discussion, I learned one very important lesson, which isprobably the key to this: It is the problem of understanding physical and thermodynamicthinking in economy. It seems to be very difficult to introduce this thinking into the scienceof economy. Why?

If one looks at the different schools of thinking of the members of different sciences ortechnologies one discovers many facts that make it difficult for these members really tounderstand one another and communicate with one another if they dont try, really. If aphilosopher and a theoretical physicist talk about time, they talk with very great probability

about different worlds even though they try to understand each other. It is not very longago that even physicists had different opinions on the relativity of time with respect to thetheory of relativity of Einstein. The basic school of thinking in economics is very different,if not extremely different, from the thinking of a physicist, a chemist or a mathematician.And even among those three differences exist. In addition, the economics have certain ba-sic and social standards dictated by their thinking that makes it difficult to introduce aprincipal natural law. But I think that natural laws are valid everywhere and I believe thatespecially the basic laws of thermodynamics are valid in every scientific field and that theyrule our life if we like it or not. The point is like in all other phases of life among humanbeings, that we have to accept this and that we cannot live against the laws of nature. Wehave to accept that each science cannot do without the other ones. Therefore, it should be


8/107

8

an aim to strive for a mutual understanding. In our special case, we try to use the rulesgiven by the thermodynamics as basic rules of nature to apply them as far as at all possibleto our daily economic life.

4. Remembrance

The question asked at the beginning of this preface reminded me of an unforgettable ex-perience. In 1964, I had submitted a paper to the International Conference on Creep held asa Reporter Conference in London. Reporters were outstanding scientists for the specificfields in question. The morning my paper was due I was sitting with my wife in the audito-rium waiting for the report on my paper. Then it happened before my paper was due. A re-porter glanced over the several hundred listening scientists in the auditorium cleared histhroat and said pronouncing in best Oxford English: As for the paper of Dr. X. - pause - Iam very sorry that this paper was ever written! - Pause - I go on to report on the next paper

of Mr. Y.

I think the total lack of tolerance as toward this scientist Dr. X, who gave his best, has in-creased in the past decades to such an extent that is almost unbelievable. This is somethingof which I accuse the development of our society. Somewhat later, after that remark, mypaper was reported on and as far as I remember it was a good report but the shock aboutthat remark was still shaking me. That evening my wife and I had a very good dinner in anIndian restaurant in Soho.

5. A Final Remark

At the beginning, I asked the question: Why was this study ever written? The answer is: Itry to do my best I can to help mankind striving for a positive future. Its only a grain, butmany grains can very often do good things. I have just one hope: That nobody will ever saywhat that reporter in London said at that conference in 1964. However, if someone says ithe should at least give exact explanations. Thats a main point I am missing in all my triedconnections.

Before I close this preface, I like to make the following special remarks about the basis ofthis study. The epistemological work of N. Georgescu-Roegen (1906-1994) of the 60 th andthe 70th were very important to me after my not very successful attempts in the 70 th and80th, i.e. before I read the first time of Georgescu-Roegen exactly in fall 1993 in an articleof the paper DIE ZEIT. The next breakthrough came after solving the question of the re-placement of the temperature in economics, some time around 1994/95 introducing a con-stant. Finally, the possibility of the application of the Thermodynamic Analysis devel-oped in the early 50th by my admired teacher Prof. W. Oelsen (1905-1970) was the pointwhere I had the feeling that I had succeeded. Without the both gentlemen, N. Georgescu-Roegen and W. Oelsen, I probably would have not arrived at the results of this study.


9/107

9

1. Introduction

The global economic development since we started into the new century is anything butsatisfying. But is it really a new development in this 21. Century? Was the 20th Centuryeconomically a sound one? Was the 19th Century a sound one? Certainly not. But one gets

the impression that the economic problems start to accumulate to an extent that seems to berather dangerous for the further development of the species of human beings. Looking atthe past we clearly see one reason for this trend: 10.000 years ago there lived about 120million people on the globe, 1.000 years ago there were only about 4 times more men liv-ing on our planet, 480 million. Just 100 years ago there were all together close to 2 billionand now the number of people living on earth comes close to 6.5 billion with the ratherworrying prospect that we will have a crowd of intolerant, selfish, ignorant and rather reck-less of 10 or more billion human (?) beings within the next thirty or forty years fighting forliving on the same surface of our planet and under the same sky as 10.000 years ago.

We have about 86 Million km2 Land available on earth to live on. That was 2 acre (0.72

km2) per capita 10.000 years ago. Today it comes to 0,04 acre (0,0132 km 2) that is 2 % ofthose 10.000 years ago. The 86-million km2 land consist of woodland, farmland and pas-ture land, they remain constant in a first approximation while the world population ex-plodes exponentially. About one hundred years ago no automobiles, no airplanes, no tour-ism, no globalization of industries, just 5 cities in the world with more than one millionpeople, now we have more than 500 cities with more than 1 million people living there,even up to 20 or 30 million in some of them. Roughly half of the world population willsoon be living in cities! It is almost a never-ending task just to list the problems, whicharise only by these facts. Can we solve them?

The industrial problems in the world increase year after year. The same obviously is truewith the economy of all states of the world. The indebtedness (more or less) of all statesincreases from year to year. All attempts to solve this problem have had no actual positiveeffects or results. The results of the work of the World Bank and the IWF are not very con-vincing, although both institution do the best they can. But do they use the right tools? Dothey have the right tools?

The worldwide unemployment increases from year to year with extreme burdens on statesund industry. The poverty in the world increases to an extent that nobody can foresee theconsequences neither politically nor economically. The UN warns year after year not onlyof these problems. But they will become serious, very serious and by all probability dan-

gerous.More and more companies, large ones as well as small ones or even very small ones, raninto increasing financial problems during the last decades. Armies of consultants mobilizeall their power to solve the increasing problems. Turnover and profit in this business in-creases almost to the same extent as the problems increase, still.

There is no sign on the horizon that somewhere someone found a solution to stop the nega-tive development we all observe. The helplessness of the politicians is almost normalityand nobody is astonished about it anymore. The professional competence of our govern-ments is not convincing, it looks as if it has never been. Obviously we are not able to

change the direction of the present negative development into a positive one. A curing ofsymptoms seems to be the present ultima ratio. Our known instruments seem not to be ableto change the direction of the development of our worldwide problems. Even the modern


10/107

10

systems of computer science could not avoid this development if one neglects temporarysuccesses, which were followed by further catastrophic developments.

The question therefore is: Are there possibilities at all to solve the economic problems ofcorporations or states or (last but not least) the problems of the world economy? Many ob-

servations point into the direction that the critical development of the world economy hasan exponential trend. This all points in the direction of a proportional correlation betweenthe economical problems of the world and the increase of the world population in connec-tion with the exponential increase of the usage of our non regenerative resources. Thistrend is enforced by the desire of man not only to keep the present standard of living butalso to increase it further and further even by using state subsidies insisted upon. One getsthe impression that many people, unions, politicians, i.e. all of us, have lost the sense ofproportion. The so-called shifting of income from high to low is not the tool for a solution;its another (wrong) medicine to cure symptoms.

A basic problem in this connection is the fact that men are by nature not able to realize the

exponential character of the mentioned development. This is due to the Weber-FechnerLaw, also called the basic psychophysical law, that says that human beings are not able torealize mentally an exponential development as such, i.e. developments which are only tobe realized by mathematics. It is therefore very difficult to make a broad mass of men tounderstand what is going on and to convince them of what to do about it. This law fur-thermore is a reason for wrong planning and wrong decisions if cases of exponential factsare involved.

By all this we have to ask the question: Is it possible to stop the present negative develop-ment of the world economy at least to a certain extent? Should this be the case then theonly question remains: Do we have a chance and the tools to slow down the present devel-opment to a degree just to give the further increasing population of our planet a chance toextend the 10.000 years of our cultural history for at least some few thousand years?

Starting from this point in this study we ask the question whether there are known naturallaws that could be of help to solve the above mentioned problems. For this we have to lookfor laws that could be of help on the basis of their principal contents and to be valid for thecomplicate conditions in the industrial world, the world economics, the financial economy,etc. This means looking for laws that could be of some help for diagnosing economicalproblems as well as to deliver tools for planning and executing economical procedures. Ifthere were such natural laws they would possibly even show us where we infringe against

such laws.There are laws in the natural sciences that are generally valid in physics, chemistry, biol-ogy and technology as well as in all things we can think of, probably including the eventsin the universe. Nobody would have any doubt anymore that this is true. Here we think es-pecially of the basic laws of thermodynamics, the first and the second law, known as theLaw of Energy Conservation and the Law of Entropy of Irreversible Processes.

The thermodynamics is the science of energy in all processes of physics, chemistry and soon. Because there are no known processes in nature which do not obey both the laws ofthermodynamics regardless if these processes occur in open or closed systems it is only

natural to try to find out if these laws may be applicable to economic processes; qualita-tively as well as quantitatively. A further basis for this attempt is the fact that everythingthat occurs in our world, and this includes all processes in the economy, depends on a sup-


11/107

11

ply of energy regardless in what form. Independent of looking at a small retail shop, a largecorporation, the national economy or the world economy, nothing works without the inputof energy.

Because this is so it must be possible to explain every process in economy in energetic

quantities, inclusive the transfer of information as a part of economical procedures. Theenergy consumption of a production company is included in the prime costs as well as theBSP contains all costs of the energy consumption of a state. On the basis of known statisti-cal data it is easily possible to determine the amount of energy used per unit of prime costof a product or per working hour or per unit of the BSP of a state.

The following is just an example: In the processing branch of the German industry therewere about 6,84 million people working in 1987. The turnover of this branch amounted to0,74 x 1012 . The energy consumption was totally 2160 Peta-Joule. On the basis of 1650working hours per worker and year we arrive per working hour at a turnover of about 65, - and an energy consumption of about 190 Mega-Joule per hour. If we validate these val-

ues in the new century and the new currency of euro () or even dollar ($) it comes out thatone euro or one dollar corresponds roughly to about 0,8 kWh. At this point it does notseem to be necessary to make a more elaborate calculation, the point to show here is thatthere is proportionality between energy and money in economy. For the production of amachine with prime cost of 100.000, - $ the energy equivalent is about 80.000 kWh = 2,9x 1011 Joule of used energy for the production of this machine. If one is looking for veryexact figures of the proportionality of money and energy one just has to consult the figuresof the respective statistical offices of a state.

The obvious fact that all economic operations are energetic operations or can be reduced tosuch operations or processes must have the consequence that the laws of thermodynamic,i.e. the first and the second law, have to be valid for economical processes. We thereforecall these processes ecodynamical processes from ECOnomy and ThermoDYNAMIC. Butif that is so, we can postulate already at this point that in economy generally each form ofenergy is proportional to the corresponding monetary values. Therefore even if we use inthis study most of the time the term energy it is in most cases tantamount to the termmoney. The laws of thermodynamic must have fundamentally the same importance ineconomy as in physics, chemistry, biology etc. Already about 30 years ago N. Georgescu-Roegen pointed out the importance of the second law of thermodynamics in very elaborateepistemological methods. As it seems to be with not very great success with his felloweconomists. Well, he personally had the advantage of a basic study in physics.

It shows that in the ecodynamics the general and the mathematical definitions differsomewhat from those in the science of thermodynamics and the technical thermodynamics.The reasons become clear easily. The general law of gases that plays a fundamental role inthermodynamics and the thermodynamic temperature of an equivalent importance in ther-modynamics dont mean anything in economics. The thermodynamic temperature of abank or the volume work of a department of revenue or the specific heat of a productionfactory, just to name only three classical thermodynamical terms make no sense in ecody-namics at all. But on the other hand we will see in this study that the formal derivationsand laws of thermodynamics can be transferred without any restrictions into the ecodynam-ics.

Starting with this general thinking we develop in this study an economical foundation onthe basis of the laws of thermodynamic as formulated in an economical sense. To do this


12/107

12

we use the classical phenomenological description of thermodynamics as well as the re-sults and derivations of the statistical physics and quantum theory when treating the eco-dynamic quantitatively. We will not present a formal quantitative reasoning of the laws ofphysics, as this is not necessary for the understanding of ecodynamic relations. These lawsare given and proved elsewhere so the reader is not depending on looking up special litera-

ture of physics. As my teacher in thermodynamics, Prof. W. Oelsen, said at such occa-sions: Sometimes you have to believe something to step forward.

We shall present a very thorough concept that the thermodynamic temperature has nomeaning in ecodynamics and is to be replaced by a constant which we arrive mathemati-cally almost the same way as the thermodynamical temperature is arrived at. The reasonfor this being the obvious fact that anthropomorphic systems must have almost a constanttemperature as explained later in detail. Furthermore we will show that the bit of the in-formation theory has a very defined energy and that therefore there is a direct link betweenthe information theory and ecodynamics.

Similar to the fact that people do not, or cannot, realize the true effect of exponential de-velopments according to the Weber-Fechner-Law, the working people in general probablydont realize the strong energetic dependencies within economic systems because it israther difficult realizing the meaning of the entropy in this connection. This probably isone of the reasons for the permanent demand to increase the quality of life with the resultof a permanently growing economy by neglecting the faster and faster increase of entropy.

The unequal distribution of the growth of the population in less-developed countries ascompared with the industrialized (wealthy) countries has the consequence of an increasinggap between these countries. As long as the wealthy industrial countries set their main goalin the increase of their economy for the fortune of their people, the economic problematicon earth will not only remain but will increase and this probably with increasing speed.This acting of the wealthy countries is not only one of the main reasons of world unem-ployment but will also become increasingly a political problem of intolerance and viola-tion. The increasing difference in social levels through the selfish economic behavior of the(over) developed countries as compared with the poor and hungry less-developed countriesand increasing (overflowing) population must finally lead to an explosion. One of the cen-tral quantities of this development is the increasing entropy. It may sound rather exagger-ated but if one defines increasing entropy as increasing chaos the result will be religious,economical and moral intolerance.

The central quantity of the development of economical processes is according to the sec-ond law of thermodynamic the entropy. This question will be treated later rather thor-oughly. But at this point we will give a first definition of this difficult to grasp quantity.

On April 24, 1865 R. J. E. Clausius used this expression for the first time in his originalpresentation of the Second Law of Thermodynamics before the Zrich Natural ResearchSociety. Clausius had looked for an expression coming as close as possible to the word en-ergy. He derived the word entropy from the Greek = change, turn around; = turn inside and = to change, to alter. These translations do not ex-plain too much if one does not connect it directly with the word energy. Entropy means inthis connection the change of useful energy in some other form where it cannot be used

anymore. This somewhat free interpretation comes as close to the later quantitative


13/107

13

mathematical derivation as possible. Another general definition of the entropy says that theentropy is a measure of the disorder of a system. Both these qualitative definitions seem tohave no relation to each other. This shows the difficulty to understand what entropy reallyis. Here we suggest staying for the time being with the broader energy explanation.

We will see in detail that in economic processes usable energy changes principally into an-other form of energy which cannot be used for work anymore, with the result of an simul-taneous increase of the entropy of the said system. Each production of a good by man re-sults in an increase of entropy of the system we live in. The original reason was the neces-sity for human beings to do something to stay alive, to supply the four basic needs for life:food, clothing, shelter and fire. These processes create a rather small but necessary amountof entropy. The negative point we have now to stress is the increase of entropy throughprocesses to fulfill the desire of men for wishes which have nothing to do with the mainte-nance of life they are strictly luxurious. These increases of entropy exceed the necessaryminimum increase in an exorbitant way. The screw of increase of wages/salaries in-crease of prices represents a further entropic process, the one of the entropy of money.

These are just some examples of the application of thinking in terms of the second law ofecodynamics, as we should point out already at this place.

We mentioned N. Georgescu-Roegen (1906 1994) already, a known and worldwide re-spected economic scientist who has worked very thoroughly on the epistemological ques-tion of entropy. In his books Analytical Economics (1967) and Energy and EconomicMyths (1976) he treats the importance of the entropy in a general way also questioningsome of the ways of what we are doing. For instance he is very critical of questions of re-cycling by saying, that in many cases the recycling process does not pay off the used en-ergy, i.e. the result is still an increase of entropy and an uneconomical decrease of usefulenergy. Looking at the foregoing paragraph there remains the epistemological question ifman is actually willing to reduce his increasing demand of luxury to give future generationa chance for living some other thousand years.

With this remark we come back to the problem of understanding entropy. Thermodynamicis taught at all scientific universities and technical universities. But fact is that thermody-namics is a rather difficult subject. Everyone who can afford it, circles around this fieldduring his studies as far away and as long as possible. This applies especially to the secondlaw and the questions of entropy. This may be the reason why the author so far to the bestof his knowledge has not found a quantitative treatment of the first and second law ofthermodynamics for economic questions.

The scientific buildings of the science of economy and the science of thermodynamic seemto be very far apart from each other. On the other hand the present study shows that ther-modynamic und the dynamic of economy are very closely linked together. Georgescu-Roegen already said that the relationship between the economic process and the en-tropy law is only an aspect of a more general fact, namely, that this law is the basis of theeconomy of life at all levels. Or: By improving and broadening our understanding of theeconomic process it (the entropy law) may teach to anyone willing to listen what aims arebetter for the economy of mankind and there can be no doubt about it: any use of naturalresources for the satisfaction of nonvital needs means a smaller quantity of life in the fu-ture. He further said, Clausius may very well be hailed as the first econometrician. I

think he is right.


14/107

14

As it looks the thermodynamic laws describe all technical, chemical, biological and physi-cal processes of this world with respect to their energy behavior and their direction ofprocesses. These laws describe the economic processes of this world as well with respectto their energy behavior and their direction of process. This means that economy can belooked at as a special part of thermodynamics as Georgescu-Roegen puts it.

Einstein once said about thermodynamics and its laws:

"Thermodynamic is the only physical theory of general contents of which I amconvinced of that it will never be changed with respect to the appliance of the basicfundamental concept this for the special observance of the principal skeptics.

Arthur Eddington, one of our most famous astronomers stated:

If your theory is found to be against the second law of thermodynamics, I give youno hope, there is nothing for it but to collaps in deepest huminilizaton.

In this study we deal in the first chapters with some basic definitions and then thoroughlywith the application of the first and second law of thermodynamics on economic processeswithin and between economic systems. In the following chapters we treat the Free Energyand the process of merger. For this we need an extension of the thermodynamic basicstreated before. It is unavoidable to demand something of the reader who is confronted withthese ecodynamical questions. But it is strongly attempted to describe the results and con-clusions in a way as easily to understand as possible.

Generally it is our aim to develop on the basic thermodynamics some correlations andsome laws for use in ecodynamics. The non linear thermodynamic developed in the lastdecades and the thermodynamic that deals with questions far off the equilibrium will notbe applied or discussed here. We will see that the development and the application of thebasic ecodynamic questions are difficult enough, so why to complicate them with othernew theories. On the other hand the used basic thermodynamics in this study is the unques-tionable foundation for any further ecodynamic questions. This we will leave for the fu-ture. With the here offered presentation it is hoped to open the possibility for helping tosolve economic problems using the knowledge and experience of the classical economywith the help of ecodynamic thinking.

The author likes to make a very serious and distinct remark at this point. This study is by

no means and absolutely not even an attempt to a philosophers stone! This study is thedesperate attempt to be of some little help for the human beings to survive. The author issaying this as his wife and he have five married children and further descendants who alllook to the future and so he hopes that the readers will understand his concern.


15/107

15

2. General Remarks

Before we start to go into the details of the laws of the ecodynamics applying the laws ofthermodynamics we have to define some terms in connection with the economic systems.

This is necessary as we are using thermodynamic terms for economic questions and viceversa. We will not leave the basics of thermodynamics but we have to build, lets say, abridge to the economy in the form ecodynamics.

2.1 Systems of Ecodynamic

As economic systems we may consider for instance large corporations, production compa-nies, retail shops, service companies like hospitals, departments of revenue, insurancecompanies, etc. But states or countries are important and decisive economic systems, too.In the last consequence, every household and every final consumer must be looked at as aneconomic system.

The global economic system, the global system where all people of this world live in, hasto be considered as an economic system consisting of n i subsystems as for instance thestates on earth or defined areas where people live in, like the Eskimos. The location or thearrangement of the boundaries of economic systems depend only on the question to besolved as for instance if one is looking for the production of a specific factory or the ex-change of goods between economic systems or the question of the merger of two compa-nies.

An economic system as such is enclosed by system boundaries, which separate this systemfrom other economic systems. The location or the arrangement of these boundaries de-pends only on the questions asked and to be solved. Therefore, one has to define thethought boundaries generally according to the problem. This we will also do when treatingthe laws of thermo- and ecodynamic in the later chapters.

Studying economic systems, we are mainly interested in solving one or all the three ques-tions:

What is happening within an economical system?

What is the balance of energy of the transport of physical or non-physical energy

crossing the boundaries of the economic system or systems

What happens when two (or more) economic system merge?

To solve these questions we are looking at the economic systems to investigate to be in astate of equilibrium. Then we will take differential changes in form of differential input oroutput of physical or non-physical energy. For instance, these energies can be productionmaterial or wages respectively. (See chapter 2.2) These so-called quasi-static changes tellus what is going on within an economic system by these very small steps.

In case of the question of a merger, we have to develop additional relations we do not need

for both the other questions. These laws of an ecodynamic of binary systems will be treatedin Chapter 5.


16/107

16

The basic properties of an economic system we learn in this study are valid in general andindependent of the properties of the system boundaries which we still have to define or thetypes of energy crossing these boundaries or the state function of economic systems.

The state of an economic system at a certain time is principally independent of the way in

which the system has reached this state. This law of independence is very important andalways to remember although an economic system can reach a certain state by many ways.This means too, that the state of an economic system is always independent of its history.

The boundaries of a system as such never influence any formula or calculation. The systemboundaries are mathematical surfaces but no separate systems. The thickness of theseboundaries is mathematically zero. Analytically decisive however is the allocation of theboundaries with respect to the treated economic systems and the type of energies, whichcan pass these boundaries.

In this study we distinguish between three different basic types of economic systems in

combination with properties of coordinated system boundaries:

Open Economic Systems

With open economic systems all types of energy, physical as well as non-physical,can cross the system boundaries in any direction.

Closed (adiabatic) Economic Systems(adiabatic: Greek, no transition)

For these economic systems, physical energy is principally not permitted to crossthe system boundaries. On the other hand, the transition of non-physical energy likewages and salaries is possible.

Isolated Economic Systems

For isolated economic systems, neither the transition of physical nor non-physicalenergy is permitted. The system boundaries are impermeable to any energy transferand this includes informations. Isolated economic systems can only develop inter-nal balancing processes.

If not mentioned otherwise we are principally using only differential quantities for thetransfer of system boundaries. This type of treatment has no negative influence on the va-lidity of the developed laws and guarantees mathematical transparency. This type of treat-ment is generally used in thermodynamics.

We have already mentioned that system boundaries can be changed with respect to their al-location. This means for instance that the base of an economical system may be variable.In such a case, we have to consider whether this is a fictive variation or an effectiveenlargement or reduction in size of an economic system. In this case, we would have toconsider an energetic change of the economic system as for instance an increase or a de-crease in company capital.

For this thought, we will look at a simple example: A company owns an adjacent arableland, which is not fenced in within the company. To add this arable land through a fictive


17/107

17

or even effective moving of the fence just changes the fenced in area of the company butnot the contained energy of the company as long as the arable land is balanced in the bal-ance sheet of the company. But if the company has to acquire this land in the first placethen the company will be weakened, as it has to spend money for the purchase. As we willsee later this means a decrease of the inner energy of this company (Investment in Size!).

Looking at open economic systems we observe normally that the system boundaries arecrossed by a flow of physical or non-physical energy in both directions, in and out the eco-nomic system. To treat these movements of goods we can use without restriction differen-tial quantities, as we will see.

For the treatment of large and/or complex economic systems, it is advisable to define socalled control rooms which may contain as many single economic systems as necessary.By this way, it is then easy to investigate the exchange of energy between two economicsystems without the influence of other adjacent systems. In case of an investigation of themerger of two economic systems, we put both systems in a separate control room with a

further system boundary between both of them. By removing the thought boundary we canevaluate what influence the merger has on either one of both the companies. After this, onemay remove the boundaries of the control room to look for the influence of the merger onthe outside.

Generally, we look at economical systems in an ecodynamical way as a business systemwith the accompanying balance sheets and profit and loss accounts. According to the vari-ous different questions on may bring up, the system boundaries may be placed in the mostconvenient way.

There are many ways to classify economic systems and their interrelations with one an-other or with the surrounding system of nature. What we want to say is that the possibili-ties of the chosen structure of economic systems is practically unlimited and dependentsolely on the questions asked or to be solved.


18/107

18

2. General Remarks

2.2 Energy Types in Ecodynamic

Now we have to define the quantities and the modes of energy we observe in economicsystems. It is evident that we cannot use thermodynamic quantities like the thermodynamictemperature, the specific heat, and transfer of heat or volume work in ecodynamics or ineconomic questions in general. The temperature of a production company or the specificheat of a bank does not make any sense. A special problem presents the term or quantity oftemperature. In thermodynamics, this is probably the central quality at all. We will see,while treating the question of the second law of thermodynamics for the evaluation in eco-dynamics that we will arrive at a constant quantity instead of the quantity temperature.

We start here with the definition of the energy quantities, as we will use them generally in

the ecodynamic. Energy quantities, which we apply later in connection with the question ofmerger, will be introduced with the treatment of the ecodynamic of binary economic sys-tems.

In the introduction, we have said already that monetary values and energy values areequivalent in ecodynamics. Every good for which we have to pay money needed for itsproduction energy. Aluminium for instance is produced from the mineral bauxite with thehelp of electrical currant. In rolling mills driven by electrical currant aluminium sheets arerolled after heating to rolling temperature in electrical heated furnaces. On hydraulicpresses powered with electricity, we manufacture pots and pans. The deeper we look intothe details of economic processes one discovers that energy is used everywhere, that noth-ing goes without the application of energy in what form whatsoever. Even men have to eatwhich means nothing else but to supply our bodies with energy just to stay alive and beable to do mental work as well as manual work to produce goods or general services weneed for life or we like to have.

For the ecodynamic, we consider it as a general condition:

Money and energy are proportional to each other.

Theoretically, we could even print bank notes with Joule values instead of Dollars or Euro

signs. These notes would have a constant value. In this study, we use instead of moneyvalues energy quantities, as this is the basis of all of our thinking here. We use terms likeInner Energy, Entropy, Exergy or Anergy etc. because we define that these quanti-ties have in ecodynamics exactly the same meaning as in thermodynamics. The exactmeaning of these and other quantities will be worked out in detail in the next chapters.

In ecodynamics, we have to distinguish between three different types of energy:

1. Energy that enters the economic processes in form of material or with the helpof materials

2. Energy that is brought into the ecodynamic processes by the working man tocreate a good or a service,


19/107

19

3. Energy which is necessary in form of capital to make economical processespossible like for instance by investing machinery.

Details to 1:This energy we call generally physical energy with the notation Q or q. Under this term,

we summarize all forms of energy, which is or was in some form material. These are ores,metallic or non-metallic or organic raw materials, finished products from a nail to an air-plane, from a cupper wire to a computer or pharmaceutic products. Electrical currant is aphysical energy too; its origin starts with oil or coal etc. As physical energy we define alsoservices as results of engineering, services of insurance companies if for instance the fi-nally result is the purchase of a physical good. Q and q also represent machines, whichleave a manufacturing enterprise or enter the factory of a buyer.

We can write this in form of an equation

Q Qj = ni qi (2.1)

where ni gives the number of the specific physical quantities q i, which flow into the prod-uct Q.

Details to 2:To produce or to manufacture semi finished products Qi or qi or finished products Qx or qxit is necessary to use physical energy in form of raw material and non physical energy Wor w in form of wages or salaries to initiate the work of man to produce a pan of a peace ofaluminium sheet. These are money values the workers in an economic system receive asenergy incentive to do something. Later we will see that this is the Value Added.

We can writeW Wi = nj wj (2.2)

Where nj is for instance the number of workers involved in an economic system.

Details to 3:Decisive for the inner value of an economic system is the capital flow in or out of the sys-tem.

This capital C or c is a measure of the size of an economic system but not of its effective

efficiency or production capacity. The capital C or c represents the capital equipment(capitalization) of an economic system for the investment in machinery, buildings, etc.Further, we list here non-productive materials used in the production or the administrationetc. For this a basic example: production equipment leaves a manufacturer as the energyequivalent Q and is acquired by another economic system as investment to producesomething else. The buyer has to spend the capital +C on this equipment whereby he in-creases the value of his economic system. We can write:

C Ci = nj cj (2.3)

Where nj is the number of the capital flows cj, which can be plus or minus.

Money values crossing the system boundaries into the system without being used directlyrepresent latent energy. This latent energy can be transferred in physical material q or non-


20/107

20

physical energy w or c to be used for investments. As long as there is no effect, thesemoney values are suspense items on a suspense account. If they are designated for a spe-cific purpose, and one likes to list them, one could do it for instance with q, w or c. Wewill not consider values of this kind here anymore, as they do not have any influence onour basic question. This does not mean one could skip them in practice.

Generally, there will be probably no decisive problems to define the energy quantities orthe corresponding/proportional money values. If one is in doubt one has to make a carefulanalysis of balance sheets and profit and loss accounts to determine what form of energyhas to be considered.

Like in thermodynamics, we have to distinguish very carefully between extensive quanti-ties Q, W or C and intensive quantities q, w or c as we said already. Extensive quantitiesare dependent on the size of on economic system while intensive quantities are entirely in-dependent of the size of an economic system. We will come back to the point in detail inthe next chapter.

Because we deal basically with quasi-static functions, we are permitted to use differentialvariations only. We must write therefore:

Q = nj dqjW = nj dwj (2.4)C = nj dcj

Looking at these differential equations it becomes obvious that the intensive quantities arethe decisive ones in ecodynamics, because only on this basis it is possible to develop basic

mass independent equations.In order to simplify our treatment we shall normally do not pay attention to losses likescrap or waste. In the basic equation, only additional figures would have to be added with-out a change of the basic meaning of such equations. Detailed analyses naturally require aconsideration of such values.


21/107

21

2. General Remarks

2.3 State Functions in Ecodynamic

Operations or processes in ecodynamic as well as thermodynamic systems with definedsystem boundaries are described by quantities, which clearly define the status or the stateof the system. These quantities are generally called state functions. State functions musthave certain characteristics and have to obey certain mathematical laws. In the followingwe will lay out the necessary first basics for state functions in ecodynamics.

The State Functions Q, q the physical energy, W, w the non-physical energy and the capitalas energy C, c, which can cross the system boundaries, describe the economic systems inecodynamic. The forth state function of an economical system is the inner energy U, u.This inner energy gives information about the production capacity of such a system as forinstance in form of the capital (money/energy) invested in production equipment. The

difference of U2 U1 therefore is the change of inner energy of an economic system. Thedifference U21 may be larger or smaller than zero. We will learn more about the mostimportant state function S, s when we come to the description of the second law of ther-modynamics.

Again we have to distinguish carefully between extensive and intensive quantities. The ex-tensive state function X of an economic system represents the sum of the extensive statefunctions Xi of the parts of the system or of subsystems according to

X = Xi (2.5)

Extensive State Function is written principally in capital letters, as U, Q. W, C, and S.

As we have seen already intensive state functions are independent of the size of an eco-nomic system therefore they do not have additional properties. The temperature is an easilyto understand example. A large room divided into small rooms with walls not permeablefor temperature where all small rooms will have the same temperature will not change thistemperature when all walls are removed. If we look for the volume, however the total vol-ume of the large room is the sum of all small ones.

It is now possible to reduce extensive quantities like U, Q, W or S to intensive quantities.

With this, we have the possibility to formulate general laws. If we divide extensive quanti-ties by the corresponding base unit, we obtain the intensive value of this intensive statefunction according to

x =n

X(2.6)

where n is the number of parts which represent X. Principally we can say that all intensivestate functions are the reduction of the corresponding extensive quantity to the base quan-tity. The quotient of two extensive quantities is always an intensive quantity. Specificquantities are intensive quantities too.


22/107

22

Intensive state functions are written here always with small letters like q, w, c, u, and s.With few exceptions like in chapter 5.4, we use in this study only intensive state functions.On this basis, we obtain unmistakable mathematical correlations.

Every change in the state of an economical system has as a consequence a change of one or

more state functions. This means that every change of an economical system interfereswith the system, which results in a disturbance of the state of equilibrium. To treat suchdisturbances is rather difficult if one does not apply the technique of differential steps. Welook at processes in or between economic systems as very slow processes where we take itas given that the processes move in differential steps from one state of equilibrium to thenext state of equilibrium. This means that we consider each change of state as a quasi-staticevent. This is the usual way of the mathematical treatment of thermodynamical problems.We do so as if the economic systems follow up a sequence of states of equilibrium. The re-sults or laws obtained in this way can be transferred fully to all economic systems in eco-dynamics.

We mentioned already that state functions have certain properties. To enable us to treateconomic systems mathematically sensible without too great difficulties we say that eco-nomic systems are homogeneous. This assumption is possible because economic systemsgenerally consist of a very large amount of parts. Using a macroscopic analysis in ecody-namics as it is done in thermodynamics, then we can say that the sum of all microscopicsubsystems in an economic system can be treated as a homogeneous system. In case welooked at an economic system as heterogeneous we would have to apply for each statefunction for each heterogeneous part of the system separate equations. Taking into accountthat the number of heterogeneous parts in an economic system can reach a magnitude of1010 it is obvious that a mathematical treatment on this basis is almost impossible. Fur-thermore we will experience that using such a way will not give us additional knowledgeor insight of what is going on. An observer outside of an economic system sees this systemanyway as a homogeneous unit. Microscopic details are of no interest to him as he is inter-ested in what goes on in general i.e. the result of an input or an output of the system.

In an elementary homogeneous economic system we can describe the specific state of thesystem well defined with two independent state functions

u = u (q, w) (2.7)

This means the state function u is a function of q and w, which are measurable state func-

tions too. On the basis that the state function u is steady differentiable we obtain for thedifferential of the dependent intensive quantity du

dww

udq

q

udu

qw

(2.8)

du = x dq + y dw (2.9)

where the coefficients x and y can be constants as well as functions of the state variable.For each state variable du is mathematically a total (complete) differential for which the

law of Schwarz applies

wqq

y

w

x

(2.10)


23/107

23

as well as the condition

0du (2.11)

i.e. after the system comes back to the initial state, the state function does not differ fromthat at the starting point.

We have further to consider the following correlation between the partial differentials

f (u, q, w) = 0 (2.12)

u = u (q, w) q = q (u, w) w = w ( u, q ) (2.7a)

1u

w

w

q

q

u

quw

(2.13)

We will come back to this mathematical interrelationship later on.

Based on what we have said so far we are now in the position to start with the actual treat-ment of the laws of ecodynamics.


24/107

24

3. The Laws of Thermo- and Ecodynamic

3.1 The Zeroth Law

More than hundred years ago Maxwell pointed out that the relation between three thermo-dynamic systems might have the importance of a physical law. Only 1931 R.H. Fowlerdiscovered the importance of this relation mentioned by Maxwell. At this time the first andsecond law of thermodynamics were very well established and accepted. Therefore thisnew law was named the Zeroth Law. What does it say?

Generally we observe in nature that physical systems left by themselves are tending tomove toward a state of equilibrium. Therefore we have to ask what happens to economicsystems, which are in equilibrium with each other?

A closed economic system is in a state of equilibrium if no measurable changes can occurwithin the system. With this statement we postulate the state of equilibrium of said system.Formally this postulate applies only to this system, which is in a state of equilibrium in it-self. But what is if different economic systems are in equilibrium among each other? If weapply the equilibrium postulate we must then say that there are no measurable ecodynamicchanges possible between these economic systems. Since we said already that we could re-duce all economic processes to energetic processes we now conclude:

Two economic systems, which are in equilibrium each with a third economic sys-tem, are also in a state of an energetic equilibrium among each other.

If: A C B

then: A B

This is the so-called Zeroth Law of thermodynamics and therefore of ecodynamics, too.The law looks rather simple, but one has to keep it in mind if one deals with many systemsto find out which if these system are in equilibrium with each other or not.


25/107

25

3.2 The First Law of Ecodynamics

3.2.1 Exergy und Anergy in Ecodynamic Systems

Since its origin thermodynamics counts as one of the more difficult fields in natural sci-ence. The reason for this is not only the necessary mathematical approach but also espe-cially the problem to give a vivid description of the thermodynamic problems and theircorrelations. Basis for this is to understand what is usable energy and what is not anymoreusable energy and in this connection the description of what is entropy. How can we de-scribe entropy, not by a mathematical formula but in a way of a vivid understanding?

It took almost 60 years after the publication of Max Plancks famous textbook on Thermo-dynamics that in the 40th of the last century researchers looked closer to what heat energyreally was. In this connection Z. Rant created during the decade1950 / 1960 the definitions

for exergy and anergy for the application in thermodynamic thinking in the technologicalapplication of thermodynamics. Although the mathematical treatment of the term exergyand anergy is difficult in technical thermodynamics it turns out that it is rather simple inecodynamics. The concept of exergy and anergy makes it easy to interpret difficult correla-tions. Also the first and second law of ecodynamic can be formulated for a more easyunderstanding.

The first law of thermodynamics says that there is no creation or annihilation of energy butonly energy transformation. The first law does not say anything about the direction of en-ergy transformation. This will be done by the second law of thermodynamics, which saysalso that there are restrictions between the transfer of energy from one form into anotherform. We may mention already here that work as energy can always be transferred in innerenergy of an economic system but inner energy cannot be transferred in energy of work.Using the terms exergy and anergy this correlations become more easily to understand.Therefore we define as follows:

Exergy:

Exergy is the form of energy that can be transferred without any restriction into anyother form of energy. Thermodynamically and ecodynamically exergy we define as

all forms of mechanical and electrical energy, in ecodynamics we have additionallythe non-physical form of energy which we designate with the letters w or c.

Anergy:

Anergy is the form of energy that cannot be transferred in any other form of energy.The energy in our environment is strictly anergy that we cannot use as an energysource. The same is true for the inner energy of the isothermal ecodynamic proc-esses.

It is very important to remember always that energy in form of heat in our environment

cannot be transferred into an energy form we may use. For this we shall look at an exampleof daily life:


26/107

26

We like to prepare us a little can of tea. Therefore we bring the necessary amount of waterto the boiling point and brew up our tea. For doing this we need electrical current deliv-ered as energy from the electrical power station. This current we use as Exergy. The hot teacools slowly down delivering his heat as energy to the surrounding environment. A very

small amount of the original exergy input is used for the extracting the caffeine and theethereal oils from the leaves of the tea (solution energy). During the three-minute brewingtime of the tea we get the telephone call of a very good old friend we have not talked tosince months. He reports on the beautiful sailing in the Aegis, the wonderful weather andthe romantic dining in the small fisher villages. The tea stands there, forgotten, coolingdown giving his heat to the environment, naturally heating it up, but only may be by onebillionth of C. Finally the tea has the same temperature as our room. With the exception ofthe solution energy all exergy has been transferred to anergy in the environment. Thisprocess is called dissipation of heat. This dissipated energy, we call it here anergy, is lostfor us forever, as well as the exergetic solution energy. The total result of this rather simpleprocess is a loss of energy, which we cannot reverse. At this point we may remark that we

have also increased the so-called Entropy of our world.

The reader may think of other examples more serious than just brewing tea where exergy istransferred into anergy without any use or only a small one. For instance any power stationusing fossil fuels transfers about 60 % of the used exergy just for heating up the environ-ment and therefore changing this exergy into anergy. Only about 40 % will be used formaking current (= exergy). How much of this exergy is really used finally as efficient ex-ergetic energy probably nobody can answer. Certainly it is not very much as seen by ourtea example.

The transfer of useful energy = exergy in not any more usable energy = anergy cannot bereversed, this transfer is irreversible. Because all economic processes regardless of whattype they are, always need energy for their initiation and process and it is very important torealize that this energy is always exergy, which will become always unusable anergy. Thiswe have to remember every time when analyzing economic processes.


27/107

27

3.2 The First Law of Ecodynamics

3.2.2 General Treatment of the First Law

The first law of thermodynamics is also known as the principle of conservation of energy.This principle is one of the few basic laws in nature, which are valid in physics, chemistry,biology, technology, etc. It is an a posteriori law, which we cannot proof mathematically.But there is no hint at all that would put a question mark on the first law of thermodynam-ics. Because this is so, we say that the first law is also valid for ecodynamics i.e. that itmust be valid.

It was Max Planck (1858 1947) who gave us the first basic definition of the first law inhis famous book Lectures on Thermodynamic, Leipzig 1897:

It is impossible to build a perpetuum mobile of 1. art (perpetua mobilia of 1. de-gree) i.e. a periodically working machine which delivers working power or livingpower at any time out of nothing.

There are many other formulations of the first law of thermodynamics, which all describethe principle of conservation of energy:

No energy is lost during a transformation of energy.

There is no machine, which can produce work without an energy supply.

Etc.

On the basis of these different but equivalent definitions of the first law of thermodynamicswe can postulate various definitions of this first law in ecodynamics at the start of our de-tailed treatment:

It is not possible to create an economic system that produces work at any time outof nothing.

An economic system surrounded by system boundaries, which operates only by it-

self, cannot stay in existence.

There will be no closed economic system that can supply goods and/or work ofany type beyond its system boundaries without an supply of energy in form of theproduction factors capital, material and work crossing the system boundaries fromthe outside to the inside of the system.

The first law applies inevitable for the whole global economic system, the world economy.The apparent problem that the world economy should have always sufficient energy inform of production factors as defined in business administration or macroeconomics can-not be cleared by the first law. For this we need the second law of thermodynamics, the en-

tropy law that we shall treat later.


28/107

28

But on the basis of the definitions of exergy and anergy we are in a position to make somegeneral remarks for a better understanding of this problem already at this point. The totalenergy of economic systems is always the sum of exergy and the anergy of these systems.This is a result of the first law. Exergy can be used for any energy transfer while anergy isuseless to us although it is there. Useful production factors will be changed into anergy

during any process in an economical system. This fact is not reversible! Our world econ-omy is enclosed in a world economic system. That means that the seemingly indefiniteavailable energy resources of the world will be transferred by all of our doings irreversibleinto anergy.

On this basis we can write the first law of ecodynamics as follows:

For all economic processes we need energy in form of production factors wherebyusable energy in form of exergy is transferred into anergy and therefore irrevoca-ble withdrawn from use. The sum of exergy and anergy is always constant. Atransfer of anergy into exergy is impossible.

Based on another definition of the first law of thermodynamics by Max Planck we can de-fine for economic systems:

The sum of all effects of the production factors in an economic system with agiven state as related to an arbitrary state of normality is equal to the sum of all ef-fects of these production factors which are produced outside of the economic sys-tem if the economic system transfers from the given state into the arbitrary state ofnormality. The mode of this change is of no interest for this change of state.

All mentioned definitions of the first law of ecodynamics are entirely equivalent. They tellus only the different points of views one can look at the law of energy conservation.

Lets have a more or less simple example of application of the first law of ecodynamics:

A company gets by some reason whatsoever into a state of overindebtedness. This meansecodynamically that the flow of energy in form of capital out of the company was largerthan the flow of energy into the company in form of money. The Inner Energy of thecompany, seen as liabilities on the balance sheet, differs in form of overindebtedness nega-tively from the normal state. In this case the company can be brought back to the normalstate according to the first law of ecodynamics only by a capital flow from the outside. By

what means this will be done is at this point an open question. Principally it is irrelevant ifthe overindebtedness is repaired by inflow of money (capital energy) maintaining the samesize of the company or by a reduction of personnel but no change in turnover i.e. measuresof rationalization. In both cases the indebtedness is reduced by a flow of capital from theoutside. It is but impossible that the company can eliminate the overindebtedness withoutoutside effects. This would conflict with the first law of ecodynamics. It is a fact that so farnobody succeeded to get himself out of a swamp by dragging himself out on his own hairs(with the exception of the famous Baron von Mnchhausen who also managed to get be-hind the enemy lines riding on a canon ball).

Looking at the indebtedness of the economic system of a state on the basis of the first law

of ecodynamics one arrives at analog conclusions. To speak in these cases of a real overin-debtedness is more or less impossible because by the authority and power of the govern-ment it is possible to change the money equivalents of the production factors or the inner


29/107

29

energy of a state just by dividing the amount of indebtedness through a freely chosen de-nominator. This without however considering the consequences most times too much. Thedenominator as determined by authoritative power determines the reduction or even elimi-nation of the indebtedness of a state through a capital cut. Certainly a method not advisablevery much.

Instead of such a drastic currency reform a state may try to solve the problem of state debtlooking at the very many economic subsystems within his large economic state controlroom. By combining the use of these subsystems, as for instance the subsystems tax-payer, the state may possibly succeed in reducing his debts especially if some of the sub-systems have reserves of inner energy, expressed in terms of money, which the state maycollect in form of new and/or additional taxes. But even this is rather dangerous becausethe valuable inner energy of the people will be transferred more or less without thorougheffect into anergy. The state destroys the valuable inner energy of his subsystems by curingthe symptoms of his mismanagement but not curing the actual reasons for the indebted-ness. It can easily be seen that these methods of reconstruction the debts of a state is a dan-

gerous approach. It is impossible to create a state without debts by this method. Takinginto account the lessons we will learn with the second law of ecodynamics it becomes clearthat these measures of a state will result in an irreversible increase of the entropy of theeconomic system of the state and that means destroying valuable production factors with-out to much chance to gain them back. This method is not recommend. The world wide useof it, in some way or another, may very well be one of the reasons for difficulties we ob-serve in the last decades.

On the basis of its authority a state could eliminate all his debts by a simple strike with afountain pen. But using this method of dividing through infinity the state uses the Mnch-hausen-Method. This does not eliminate the reasons for the government failures.

The probably last method to solve the debt problem of a state would be the use of re-sources outside the economic boundaries of the state for instance by war or just occupa-tion. But these methods, although not uncommon in history, have their limits by

The limits of the resources of our world

The claims of other states on the same resources.

Although we did not treat the definitions of the first law quantitatively it should be clear by

the discussion so far that we could draw very important and far-reaching conclusions gen-erally on the basis of this law. For the application of the first law of ecodynamics it is ir-relevant if we look at economic systems like companies or like states. The first law appliesto both of them with the same importance.

The examples discussed show that the indebtedness can only be overcome with externalhelp. Without this a company or a state cannot dispose of the debts. Indebtedness in eco-dynamical sense is irreversible. We have used the term irreversible already a few timestherefore it is necessary to define the terms reversible and irreversible as we use them inecodynamics. As a matter of fact there is no difference in the meaning of these expressionsin thermodynamics or ecodynamics.

Reversible are economic processes that can flow in either direction forward aswell as backward, without any energy changes of the environment of the eco-


30/107

30

nomic system in question. Reversible economic processes cannot be realized inpractice, they are only ideal changes of the state of an economic system.

Irreversible are economic processes, which only can be reversed through addi-tional energetic changes of the environment of an economic system i.e. through

input of exergetic production factors. All macroscopic processes in nature andtherefore in the economy too, are irreversible.

At this point we deducted the fact of irreversibility by our experience. When we come tothe quantitative treatment of the Second Law of Ecodynamics we will learn that there areno reversible processes possible in ecodynamics, all processes are irreversible.

According to the first law the inner energy u of an economical system is a function of thestate functions q, w, and c (chapter 3.2). These are intensive quantities, which describe thestate of a system unequivocally. We can write

u = u (q, w, c) (3.1)

If we define the inner energy of an economic system at a given state with u 2 and the normalstate with u1 than we can write the first law in form of the equation

u2 - u1 = u = q21 + w21 + c21 (3.2)

The term q21 represents the money equivalent of the physical energy crossing the systemboundaries, the term w21 is the value of the non-physical energies crossing the system

boundaries, for instance the money for wages and salaries, and the quantity c21 definesthe energy crossing the system boundaries in form of capital for instance for investments tochange the inner energy from state 1 into state 2.

The equation (4.2.) is generally valid. For detail analysis it is naturally necessary to allo-cate the various energy (money) values according to the balance sheet and the profit andloss account or the basic data for them.

Equation (4.2) says that the inner energy u of a system depends on the quantities of the en-ergies q, w and c crossing the system boundaries. With respect to the sign, + or -, we definethat all energy flowing into an economic system will be plus (+) and all energies crossing

the system boundaries by leaving the economic system will be minus (-). This is a conven-tion we should strictly maintain to avoid misinterpretations. The energy q2, which leavesan economic system for instance as the final product of a production company as q 2 maycross the system boundary of a trading company as +qi.

One of the main consequences of the first law of ecodynamics is the fact that an economicsystem cannot have any effect outside of its system boundaries without a change of the in-ner en

Documents

Aplicacion de La Termodinamica a La Economia