The Paradox of the Economy
We are so taken by our superficial culture that we hardly stop to reflect on things that we take for granted
When we consider money or the economy, we have got used to considering them in an abstract dimension. Subject to the laws of finance, but still abstract.
Have you ever wondered what money really is? I know that you would immediately go to look for a good dictionary to possibly give me the following definition.
Money is an economic tool that can assume the functions of:
A means of exchange, a unit of account, a reference for deferred payments and a value reserve.
We are still thinking superficially.
I will try to give you a different definition, but first we have to make some considerations.
When the apple tree produces a fruit and I sell it to the market, I earn a sum of money from it. If we reflect on this we will see that the sum of money is the equivalent in energy of the sum of the work done (by the sun, the tree, the land, the farmer etc.) to produce my apple. This value is multiplied by a factor that we could define “frequency of process”, in the sense that if that type of process is very diffused (the production of the apple) the coefficient will be very low (as in the law of supply and demand), if it is not very diffused then vice versa.
In any case, money represents the energy equivalent of that process for the coefficient of frequency (or of diversity).
Evidently the energy equivalent of a product is complicated when the product is the sum of many factors (as in, for example, a service) but to simplify things we can always and in any case define it as an ” energy equivalent “, even in the case of intellectual good.
Now, in a world economy which is constantly in crisis, we could think, in theory, that if I want to increase the quantity of capital all it takes is to produce more goods to resolve the problem, but here the law of thermodynamics intervenes. You may ask yourself what has thermodynamics to do with the economy?
Let’s go ahead step by step.
If money is the energy equivalent of a good or process it is evident that the sum of the energy sources is limited, even if the sources were those of the whole universe.
I immediately have to deduce, more so given that I find myself in a limited and closed environment such as the Earth, that I cannot push the quantity and the flow of capital wherever I want; there will be a fixed limit.
From this first consideration we can say that world’s wealth is linked to the sum of the energy equivalent available.
Someone could object that all it takes is to produce more, or more quickly, to increase the flow of money.
Here things become even more complicated because the second principle of thermodynamics comes into play.
We know that an energy output is linked to the process of the transformation of energy into work, and to obtain a greater output I have to create a more efficient thermodynamic machine.
Now the most efficient thermodynamic machine in existence is the ecosystem itself (see Bioethics ). The more an ecosystem is biodiverse, the more efficient it is, and the more I distance myself from eco-sustainability (also in industrial processes and in services), the more my productive processes (of any kind or nature) produce less energy.
In short, the second principle of thermodynamics says that not only can I not increase the flow of money, but if I do so in an unsustainable way, I interact with the machine that produces it (loss of biodiversity).
To understand this concept it is enough to think of an equivalent but simpler thermodynamic machine, a car.
We know that, because of the laws of thermodynamics, we can increase the power of a car by increasing the transformation of fuel (energy).
If, however, we go beyond a certain level of efficiency (which in the internal combustion engine is the torque) and I still want to increase the power, this it is possible but at the cost of a loss of energy yield. My engine will yield less, it will pollute more and wear out its mechanical parts quicker; in short, it will lose efficiency.
The same thing happens with the economic system: the more we want to quicken the transformation of energy (production), the more we decrease the yield and this, as happens in thermodynamics, goes to decrement of the yield.
The parallelism is such that this share of intransformability (linked to yield) takes the name of Entropy in thermodynamics and Inflation in Economics.
We can say then that:
Entropy = Inflation
Now a large part of economic theories based on capitalism have revealed themselves to be a real failure because they did not evaluate questions of yield and assets.
Assets are simply reserves of energy which have been accumulated and are suitable for transformation into profit or for energy uses.
When we speak of an economically healthy company we say that it has solid assets, because the asset, whatever its nature, is an accumulation of energy which can, in turn, produce energy. The environment is an energy asset and inside this the ecosystem, through its biodiversity, is an asset within the asset.
The apparent increase of wealth in the industrial era is based on the use of terrestrial fuel sources (oil, fossil carbon, land, etc.) with an energy model in notable conflict with the Environmental System. The thermodynamic mechanism of the ecosystem has been pushed over its possible limit, wearing out many of its pieces.
Various researchers have addressed these aspects, and the economy, having escaped into the modern meaning of its etymological matrix, has entered into a paradox because it does not consider the origins of its birth and nature.
From Plato and Aristotle the economic sciences have suffered such an evolution as to escape their original matrix over the centuries.
“The relationship between economics and ecology come together under the sign of a paradox. Already at an etymological level, these two words are almost synonymous. Both have a place under the reassuring wing of the Oikos (the house, the patrimony, the niche) and yet it is known that the most coherent ecologists have become harsh critics of the economy understood as theory (Marx himself is not acquitted by them) and convinced adversaries of economics in practice. The fact is that by assigning the title of “Traitè d ‘Economies politique” in 1615 to what Aristotle would have defined with horror “the science of national accumulation”, or Chrematistics, Antoine de Montchrétien, the French mercantilist economist, has ended up creating a confusion which is destined to last in time”. *
There cannot be any economic development without rebalancing these concepts.
Who wants to show the contrary is not in good faith or does not understand some mechanisms and links with the environment, understood as an energy asset, and the economy. Whoever wants to show the contrary, be they a scientist, a philosopher or a politician, must be considered with suspicion.
Now, the energy vision correlated to its economic equivalent is a good path to follow to rebalance the concepts of a world economy that is sustainable for the ecology of the Planet.
* The paradox of the ecological economy and the sustainable development as an oxymoron –