Economics as thermodynamics
Jun 2, 2010
3 minute read

When human and physical capital accumulate, output grows. Most people would agree with this statement, but what does it mean? This depends on the meaning of the words capital and output. I don’t offer a precise definition, but both ideas seem to have something to do with useful configurations of matter and information. That is, capital and output are orderly. And whenever I think of order, I think of thermodynamics.

The second law of thermodynamics says that the entropy of the universe tends to a maximum. We cannot be sanguine about the very long-term prospects for the universe. But even though entropy increases in closed macroscopic systems, in open microscopic systems it may decrease for a period. Fortunately, Earth is an open microscopic system that is constantly (well, for now) importing negentropy from the sun, which is blowing up (tending toward disorder). This means that order is possible on Earth.

We can draw (arbitrary?) distinctions between the kinds of order that we observe on Earth. One kind of order we call “life”—we call the discipline that studies the production and depletion of this kind of order “biology.” Another kind of order we call “consciousness.” Consciousness is related to biology—it is a kind of spontaneous order that occurs within brains, which are living—but it is also studied by psychologists and philosophers.

Another kind of order is social order. This is the order that arises by interactions between (discrete?) consciousnesses. It is the domain of the social sciences, particularly economics. These interactions might include violence, altruism, and exchange. The task of economics, then, is to give an account of how these interactions (note to Hayek: not just exchange!) create or destroy order.

It is striking to me that many people reject the idea of intelligent design for life or consciousness, but accept it for social order. Social order involves conscious beings who consciously design things, but it is not itself designed. It grows organically, for the same reason that the other kinds of order grow: the application of energy, which in the case of Earth originated in the sun.

Everything I have written so far has been non-normative. What are the ethical implications if we are willing to take a leap and say that order is good and disorder is bad? We should view actions which increase entropy as bad. Indiscriminate killing (and even indiscriminate ransacking), for instance, would be bad. Eating smart animals (including, but not limited to, other humans) instead of plants or dumb animals would be bad. Interfering with order-producing social processes (such as trade) would be bad. All this seems fairly plausible to me.

That’s what I have so far. What do you think?