Advances in Ecological Economics series
Chapter B.: Biophysical limits
The first and second laws of thermodynamics should also be called the first and second laws of economics. Why? Because without them there would be no scarcity, and without scarcity, no economics. Consider the first law: if we could create useful energy and matter as we needed it, as well as destroy waste matter and energy as it got in our way, we would have superabundant sources and sinks, no depletion, no pollution, more of everything we want without having to find a place for stuff we do not want. The first law rules out this direct abolition of scarcity. But consider the second law: even without creation and destruction of matter-energy, we might indirectly abolish scarcity if only we could use the same matter-energy over and over again for the same purposes – perfect recycling. But the second law rules that out. And if one thinks that time is the ultimate scarce resource, well, the entropy law is time’s irreversible arrow in the physical world. So it is that scarcity and economics have deep roots in the physical world, as well as deep psychic roots in our wants and desires. Economists have paid much attention to the psychic roots of value (for example, diminishing marginal utility), but not so much to the physical roots. Generally they have assumed that the biophysical world is so large relative to its economic subsystem that the physical constraints (the laws of thermodynamics and ecological interdependence) are not binding.
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