The Paradoxes of Growth: toward a Systemic Approach to Economic Theory

I thought that the best way, for me, to honour G-R’s memories was not simply to show how relevant his contribution has been to the history of economic thought, rather than try to develop his work on bioeconomics, the field to which he dedicated the last 25 years of his life and which he explicitly considered the most important. Georgescu-Roegen’s bioeconomic theory represents first of all a radical criticism of neo-classical theory. It has pointed out the limitations, which are basically of an entropic nature, to which the process of economic development and growth are subject. According to the law of entropy, every productive activity involves the irreversible degradation of increasing amounts of energy and, in certain conditions, of matter. Since the biosphere is a closed system, exchanging energy but not matter with the environment, two important conclusions may be drawn as far as economics is concerned. The first conclusion is that the basic objective of the economic process, i.e the unlimited growth of production, in being founded on the use of non-renewable sources of energy and matter, contradicts the fundamental laws of thermodynamics. This objective must, therefore, be set aside or, at least, radically reconsidered. The second conclusion is of a methodological nature: the pendular representation of the economic process, found in the opening pages of any handbook on economics, according to which demand stimulates production, and the latter provides the income necessary to create a new demand, in a reversible process that is apparently capable of reproducing itself ad infinitum, must be replaced by an evolutionary model in which the economic process is seen to follows the course of time, and is thus irreversible. G-R, who understood perfectly well how central the problem of change is in order to interpret the economic process correctly, thus based his analysis of the process of production quite intentionally on the distinction between flows and funds.