Piper’s World: Downfall Before Us – Economy

Economists should never make the mistake of thinking of themselves as scientists. Physics has laws like: “In a vacuum, light propagates at a speed of 299,792 kilometers per second.” There is nothing comparable in economics. It is true that one can postulate: “When the price rises, the demand falls.” In many cases this will be true, but it doesn’t have to be. For example, there are people who buy when goods become more expensive. Maybe because they expect everything to cost a lot more in the future. Or because they believe that the higher price is a sign of quality. Economic laws are actually plausible claims that need to be tested over and over again. “Laws” of economic development are particularly nonsensical. For example when the successors of Karl Marx claim that capitalism will soon be replaced by socialism, which is why we are currently living in “late capitalism”. The Marxists have been waiting for this socialism since the publication of the Communist Manifesto, and that was in 1848.

Economics does not know any laws like physics, but there is a law in physics that has fundamental economic significance, although in practice hardly anyone associates it with economics. We are talking about the second law of thermodynamics. It says, somewhat simplified: The disorder in the universe is constantly increasing. Order is, for example, concentrated energy. If someone heats their apartment, for example with natural gas, this energy is in the warm rooms. It is still there, but you can no longer use it to cook a plate of soup, for example, it can no longer be used – the disorder has increased. Resources are irrevocably lost.

A wise economy is economical with natural resources

In the near future there will be many opportunities to deal with this law. January 2nd marks the 200th birthday of the physicist Rudolf Clausius. It was he who discovered the second law of thermodynamics. He was born in 1822 in Köslin, Pomerania (today in Poland), and died in Bonn in 1888. The university there is therefore dedicating a lecture series to him in the winter semester that has just started. Significantly, however, it deals exclusively with questions of physics, chemistry and meteorology, but not economics.

Clausius had invented his own term for the increasing disorder he described: entropy, a combination of the ancient Greek words “en“(within) and”tropics“(Turning point). The choice of words was probably not particularly clever, because the mysterious-sounding term makes it difficult for many to access the topic. Clausius himself was already aware that the law of entropy has something to do with economics.” The following centuries, “he wrote 1885, would have the task of not wastefully introducing a wise economy in the consumption of what is available to us in the form of sources of power in nature, and especially what we find in the ground as the legacy of earlier epochs and what cannot be replaced by anything squander “.

In order to survive and operate, people need a constant influx of new energy or, in Clausius’ terminology, low entropy. Actually no problem, because there is the sun. It provides warmth, grows grain, wood and everything else that is necessary for survival. The problem is that since industrialization, people have been consuming the low-entropy treasures stored in the earth’s crust: coal, crude oil, natural gas, mineral fertilizers and other raw materials. Without this consumption of substances, almost eight billion people would not be able to live on earth, let alone finance the prosperity that part of humanity enjoys. The conclusion from the entropy law is clear: only an economy that lives exclusively on renewable energy is sustainable.

Make trees out of furniture? Rather difficult!

So far, the law of entropy has hardly played a role in economics, neither with orthodox nor with heterodox scientists. A major exception was the Romanian mathematician and economist Nicholas Georgescu-Roegen (1906-1994), who lived in American exile. As early as the 1970s, he called for a reformulation of economic models. From the point of view of nature, there could be no such thing as an “economic cycle”, because this cycle needs a constant flow of low entropy in order to function. Georgescu-Roegen called the cycle model the “original sin of modern economics”. No economist had yet claimed that furniture could be made into trees again, he scoffed. However, their models suggested this conclusion.

Dealing with the law of entropy in economics can lead to deep pessimism. Georgescu-Roegen wrote: “If we ignore the details, we can say that every baby born today means one less human life in the future. But every Cadillac that is produced at some point also means less life in the future . ” Probably that is precisely why so few concern themselves with entropy and economics, also among environmental and climate protectors. Nobody wants to play the prophet who foretells decline. On the other hand: Couldn’t modern economics gain by knowing about its physical limits? After all, people can change their behavior if they are informed.

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