An analogy between thermodynamic and economic theories and processes is developed further, following a previous paper published by the author in 1982. Economic equivalents are set out concerning the ideal gas equation, the gas constant, pressure, temperature, entropy, work done, specific heat and the 1st and 2nd Laws of Thermodynamics. The law of diminishing marginal utility was derived from thermodynamic first principles. Conditions are set out concerning the relationship of economic processes to entropic gain. A link between the Le Chatelier principle and economic processes is developed, culminating in a derivation of an equation similar in format to that of Cobb Douglas production function, but with an equilibrium constant and a disequilibrium function added to it. A trade cycle is constructed, utilising thermodynamic processes, and equations are derived for cycle efficiency, growth and entropy gain. A thermodynamic model of a money system is set out, and an attempt is made to relate interest rates, the rate of return, money demand and the velocity of circulation to entropy gain. Aspects concerning the measurement of economic value in thermodynamic terms are discussed.
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Paper provided by Economic Consultancy, Vocat International in its series Working Papers with number
tefprv2007.
Length: 31 pages Date of creation: Apr 2007 Date of revision: Publication status: Published in International Journal of Exergy, Vol. 4, No. 3, pp.302-337 Handle: RePEc:voc:wpaper:tefprv2007
Find related papers by JEL classification: A1 - General Economics and Teaching - - General Economics C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models D5 - Microeconomics - - General Equilibrium and Disequilibrium E - Macroeconomics and Monetary Economics O1 - Economic Development, Technological Change, and Growth - - Economic Development
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