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Economies Evolve by Energy Dispersal
Department of Biosciences, University of Helsinki, FI-00014 Helsinki, Finland
Institute of Biotechnology, University of Helsinki, FI-00014 Helsinki, Finland
Department of Physics, University of Helsinki, FI-00014 Helsinki, Finland
Biological Sciences, Binghamton University, Binghamton, New York 13754, NY, USA
* Authors to whom correspondence should be addressed.
Received: 17 September 2009 / Accepted: 14 October 2009 / Published: 21 October 2009
Abstract: Economic activity can be regarded as an evolutionary process governed by the 2nd law of thermodynamics. The universal law, when formulated locally as an equation of motion, reveals that a growing economy develops functional machinery and organizes hierarchically in such a way as to tend to equalize energy density differences within the economy and in respect to the surroundings it is open to. Diverse economic activities result in flows of energy that will preferentially channel along the most steeply descending paths, leveling a non-Euclidean free energy landscape. This principle of 'maximal energy dispersal‘, equivalent to the maximal rate of entropy production, gives rise to economic laws and regularities. The law of diminishing returns follows from the diminishing free energy while the relation between supply and demand displays a quest for a balance among interdependent energy densities. Economic evolution is dissipative motion where the driving forces and energy flows are inseparable from each other. When there are multiple degrees of freedom, economic growth and decline are inherently impossible to forecast in detail. Namely, trajectories of an evolving economy are non-integrable, i.e. unpredictable in detail because a decision by a player will affect also future decisions of other players. We propose that decision making is ultimately about choosing from various actions those that would reduce most effectively subjectively perceived energy gradients.
Keywords: energy transduction; entropy; hierarchy; evolution; natural process; natural selection; statistical physics; thermodynamics
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Cite This Article
MDPI and ACS Style
Annila, A.; Salthe, S. Economies Evolve by Energy Dispersal. Entropy 2009, 11, 606-633.
Annila A, Salthe S. Economies Evolve by Energy Dispersal. Entropy. 2009; 11(4):606-633.
Annila, Arto; Salthe, Stanley. 2009. "Economies Evolve by Energy Dispersal." Entropy 11, no. 4: 606-633.