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Looking at Economics through the Eyes of Thermodynamics

Author

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  • Vítor A. F. Costa

    (TEMA—Centro de Tecnologia Mecânica e Automação, Departamento de Engenharia Mecânica, Universidade de Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal)

Abstract

Based on Thermodynamics and its well-established First and Second Laws, this work presents and explores their economics counterparts, introducing new concepts, variables, and equations. This includes, among others, the economic counterparts of temperature, reversibility and irreversibility, and entropy and entropy generation resulting from economic irreversibility. The meaning of the new concepts, variables, equations, and their messages are introduced and discussed considering simple yet relevant economic processes. The economic counterparts of the First and Second Law balance equations are set in addition to the base concepts and Laws. These are effective and valuable tools for the analysis of economic processes. Observations from selected economic activities are analyzed using the new concepts, variables, and equations.

Suggested Citation

  • Vítor A. F. Costa, 2024. "Looking at Economics through the Eyes of Thermodynamics," Energies, MDPI, vol. 17(11), pages 1-41, May.
    • Handle: RePEc:gam:jeners:v:17:y:2024:i:11:p:2478-:d:1399330
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    References listed on IDEAS

    as
    1. McCauley, Joseph L., 2003. "Thermodynamic analogies in economics and finance: instability of markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 329(1), pages 199-212.
    2. Elias L. Khalil, 2004. "The Three Laws of Thermodynamics and the Theory of Production," Journal of Economic Issues, Taylor & Francis Journals, vol. 38(1), pages 201-226, March.
    3. Ayres, Robert U., 1998. "Eco-thermodynamics: economics and the second law," Ecological Economics, Elsevier, vol. 26(2), pages 189-209, August.
    4. Jing Chen, 2005. "The Physical Foundation of Economics:An Analytical Thermodynamic Theory," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 5819.
    5. H. Quevedo & M. N. Quevedo, 2009. "Statistical thermodynamics of economic systems," Papers 0903.4216, arXiv.org, revised May 2011.
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