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Role of Entropy in Sustainable Economic Growth

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  • Angelina De Pascale

    (University of Messina)

Abstract

This paper investigates a possible relationship among economic growth, entropy and environmental preservation. Physics shows that energy is necessary for economic production and, therefore, economic growth but the mainstream theory of economic growth, pays no attention to the role of energy. Economics has attempted to address this question from different point of view. The classic literature focused on exhaustible resources puts at the core the importance of the price mechanism and the substitution possibilities of manmade inputs for natural resources. At the same time, others stressed the economic implications of thermodynamic laws and ecology. They insisted on the limits that physical and natural processes impose on economic activity and the difficulties in invoking the price mechanism because establishing property rights on environmental assets is often impossible. Because thermodynamics implies that energy is essential to all economic production, criticism of mainstream economic growth models that ignore energy appears legitimate. On the other hand, theories that try to explain growth entirely as a function of energy supply, while ignoring the roles of information, knowledge, and institutions, are also incomplete. This paper discusses ecological economics views on energy and growth.

Suggested Citation

  • Angelina De Pascale, 2012. "Role of Entropy in Sustainable Economic Growth," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(Special 1), pages 293-301, May.
    • Handle: RePEc:hur:ijaraf:v:2:y:2012:i:1special:p:293-301
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Ruth, Matthias, 1995. "Information, order and knowledge in economic and ecological systems: implications for material and energy use," Ecological Economics, Elsevier, vol. 13(2), pages 99-114, May.
    3. Philippe Aghion & Peter Howitt, 2009. "The Economics of Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012634, December.
    4. Ayres, Robert U & Kneese, Allen V, 1969. "Production , Consumption, and Externalities," American Economic Review, American Economic Association, vol. 59(3), pages 282-297, June.
    5. Young, Jeffrey T., 1991. "Is the entropy law relevant to the economics of natural resource scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 21(2), pages 169-179, September.
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    Cited by:

    1. Gennady Shkliarevsky, 2015. "Squaring the Circle: In Quest for Sustainability," Systems Research and Behavioral Science, Wiley Blackwell, vol. 32(6), pages 629-645, November.

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    More about this item

    Keywords

    Entropy; Sustainable Economic Growth; Technical Change;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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