Handbook of Environmental and Resource Economics
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Handbook of Environmental and Resource Economics

Edited by Jeroen C.J.M. van den Bergh

This major reference book comprises specially commissioned surveys in environmental and resource economics written by an international team of experts. Authoritative yet accessible, each entry provides a state-of-the-art summary of key areas that will be invaluable to researchers, practitioners and advanced students.
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Chapter 60: Materials, Economics and the Environment

R.U. Ayres


Robert U: Ayres 1. Introduction: the first and second laws of thermodynamics The laws of physics most constraining to technology (and therefore to economics) are the first and second laws of thermodynamics. The first law of thermodynamics is the law of conservation of madenergy. Since mass and energy are equivalent (Einstein’s equation), this law actually implies that mass and energy are separately conserved in every process or transformation except nuclear fission or fusion. Putting it another way, any physical process or transformation that violates this condition is impossible. Something cannot be created from nothing.’ This law has surprisingly non-trivial consequences for neoclassical economics. Contrary to the more superficial versions of standard theory, where goods and services are mere abstractions, production of material goods from real raw materials inevitably results in the creation of waste residuals, including waste energy. In other words, ‘consumption’ is a metaphor insofar as goods other than food or drink are concerned. (Even the consumption of food and drink generates waste effluents, or course.) The second law of thermodynamics is, in some respects, the more fundamental of the two laws. Its precise statement need not concern us here. (See Chapter 59 in this handbook.) However, roughly speaking, the second law reflects the fact that most physical processes are irreversible in the sense that systems tend towards physical and chemical equilibrium. Differences and gradients tend to be reduced and smoothed out over time. This tendency is reflected in the existence of a function, called entropy. Entropy increases in...

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