Entropy and Economics, continued

Ultimately, it is the low-entropy matter-energy that gives rise to the entire economic chain of events, even, for example, when one takes a supposedly radical stance, that of the labor theory of value: labor contributions would be nonexistent if it weren't for individual human intake of calories. As both laws of thermodynamics address this ultimate matter-energy means, it is necessary to consider the ultimate aim of all economic activity and work: "life enjoyment" (GR's term). It is the qualitative difference between low entropy and high that engenders usefulness and that allows for the ultimate purpose of life enjoyment. The distinction between the qualitative and the quantitative is embodied in the entropic concept and ignored by orthodox economics.

How exactly the qualitative-quantitative distinction is embodied in thermodynamics is tricky, paradoxical, as I will elaborate on briefly later, and is the source of the primary rift within thermodynamic theory itself: that between its classical formulations and Boltzmann-inspired statistical mechanics. The first law tells us matter-energy can be neither created nor destroyed. The second law, however, points out that it is the relative diffusion of the matter-energy, the so-called disorder, that is the limiting factor in economic (and all) activity. At the macroscopic level, at which thermodynamics is supposed to operate, this diffusion is certainly qualitative. Boltzmann and his intellectual descendants attempted, using the mathematics of probability, to reduce macroscopic, entropic qualities to the quantitative mechanics of atoms and particles. Economic theory in its mainstream incarnation is quite like the simple mechanics of money; it, then, is a part of the same legacy as statistical mechanics, and ignores the qualitative-quantitative distinction which is fundamental to the entropic worldview.

So Daly's (GR's) revised foundational economic diagram would explicitly describe that qualitative difference between useful resources and useless waste. Indeed, it is not the slightest bit hyperbolic to say that in the main the difference is totally ignored: the radioactive waste industry and oil-spill clean-ups add to GNP just as nuclear plants and trade in oil do in the first place. In fact, in the sense that natural capital is used as though it were "free" income, waste is deemed more valuable even than natural resources themselves. [The idea of rendering waste into non-waste, of revising industrial ecology so that "waste is food," is related; however, ultimately entropy awareness will lead us to see that our purposes are, that the flow of value is, best served by minimizing or eliminating waste production in the first place.]

This new diagram would emphasize that the real flow of value from the economy is a flow of life enjoyment. Whereas such negative things as waste and pollution are counted currently as benefits to the system, if our valuation systems aimed at the truer sources of value, the qualitative ones, waste and pollution might be seen as they are: detracting from (or at least totally irrelevant to) the things that count the most. As Daly puts it, "Neither the ultimate means of low-entropy matter/energy nor the ultimate end of life enjoyment can be expressed as a circular flow" (p. 195).

In addition, the abstract exchange value which is at the heart of mainstream circular-flow diagrams is exactly the origin of the myth of infinite growth: those exchange values, and the values traded in pure finance, can grow forever because "abstract exchange value (debt, purchasing power) has no physical dimension" (p. 195). Increasingly it is clear though that resource depletion, pollution, and unpredictable positive-feedback mechanisms related to global climate change are critical manifestations of the infinite-growth mythology running hard up against the constraints of local entropy.