On the Reappraisal of Microeconomics

On the Reappraisal of Microeconomics

Economic Growth and Change in a Material World

Robert U. Ayres and Katalin Martinás

The conventional utility-based approach to microeconomics is now nearly a century old and although frequently criticised, it has yet to be replaced. On the Reappraisal of Microeconomics offers an alternative approach that overcomes most of the objections to orthodox theory, whilst offering some unique additional advantages.

Introduction

Robert U. Ayres and Katalin Martinás

Subjects: economics and finance, evolutionary economics, environment, ecological economics

Extract

Our goal, when we began this work some 15 years ago, was not modest. We hoped to initiate a fundamental reconsideration of the science of economics as it applies to dynamic relationships involving the production and exchange of goods and services, while remaining fully consistent with physical laws, notably the laws of thermodynamics. This work was originally inspired, in part, by the path-breaking work on non-equilibrium thermodynamics, led by Nobel laureate Ilya Prigogine (who died as we were making final corrections to this manuscript) and his colleagues, especially Gregoire Nicolis, at the Free University in Brussels. Prigogine and Nicolis’ work introduced the fundamental concept of ‘self-organization’ creating ‘dissipative structures’ characterized by maximum entropy production and driven by a source of free energy far from equilibrium (Nicolis and Prigogine 1977; Prigogine et al. 1972). The first application of this theory was to explain some peculiar phenomena in chemistry. Subsequently a number of other applications have emerged, especially in biology. We believe that some of these ideas are also applicable in economics. This has led us to reconsider economics also as a system far from (thermodynamic) equilibrium, in which the self-organizing forces are driven by a high level of dissipation of natural resources and solar energy. This view is, of course, very different from the standard neoclassical theory currently in vogue, wherein physical laws, materials and energy are essentially ignored. Our work is more consistent in some respects with the ideas of Nicolas Georgescu-Roegen, although we disagree with one of his principal...