Energy, Production and Entropy

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This is the presentation I gave at the UN ESCAP meeting on the quality of growth today in Bangkok.

The key theme is the need to make energy the basis of the model of production, as argued by Bob Ayres and colleagues.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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44 Responses to Energy, Production and Entropy

  1. Steve Keen says:

    Hi Ed,

    I think I had better elaborate in a later post on my purpose there. It was not to argue that entropy poses a significant limitation to current production–far from it, as Drew observes in an earlier comment (thanks for that Drew, I’ll follow the links). It was that to explain how production can function in the first place, one has to work from free energy as the source–not labor, etc.

  2. Steve Keen says:

    PS read John Joe McFadden’s Quantum Evolution on the “consistency of life and thermodynamics” point. He argues that life’s function is to increase the entropic process of the universe.

  3. Steve Keen says:

    Thanks Drew, as noted above, I was not seeing entropy as a limit to production–far from it. I was instead saying that a theory of production has to explain the possibility of production itself on the basis of the exploitation of free energy.

    Thanks for those links. I’ll follow up on them, and of course I’ll make myself familiar with the maths before I develop the argument any further. The core role of entropy now I would see as linking production and pressure on the environment–not entropy and any limits to production.

  4. Steve Hummel says:

    “He argues that life’s function is to increase the entropic process of the universe.”

    That’s probably just the other end of the bar magnet nature of reality. The other and just as real end would probably say that the function of life is the intention to be better aware of itself via a merging with its actually not so solid blizzard of…..whatever science keeps positing is ultimate reality.

    T.S. Elliot’s quote is again apropo.

    We shall not cease from exploration. And the end of all our exploring will be to arrive where we started and know the place for the first time.

  5. Jeremy Dawes says:

    I recommend reading Stuart Kauffman’s At Home in the Universe for a very lucid explanation of how complexity (e.g. life) can arise without breaking the laws of thermodynamics. While entropy can only increase in a closed system, locally entropy can decrease (i.e. order can be created) when energy flows through a system.

    We have been able to sustain a massive increase the complexity of our systems (economic growth) through tapping in to a massive new flow of energy (fossil fuels). The physical limits that need to be modelled are therefore not entropy as such, but the rate of flow of energy through the system.

    I think this may also change the nature of how waste is modelled. To my mind waste should be modelled in two parts.

    Firstly it is an energy drain, in that the more we throw away the greater the rate of energy flow that is required to maintain our current level of complexity.

    Secondly, when waste causes pollution then we need to divert energy to combating the polution , e.g. CO2 waste causes global warming, which increases the water in the atmosphere, which increases the amount of water in rainfall events, which damages infrastructure, which needs rebuilding, which reduces the energy/money available for maintaining our complex society.

    A final complication which is related to entropy is that resources are not uniformly concentrated. The issue with copper production, and all other minerals, is that the cost of extraction is inversely related to the concentration of the ore. The most concentrated deposits are mined first at low cost. As the most concentrated deposits are used up we move onto lower concentration deposits which take more energy and so cost more. WebHubbleTelescope has some very detailed maths behind this which he calls the .

    At some point the concentration of the ores will become so low that the energy required for extraction will more than the energy we have available and the ore becomes off limits (in violation of orthodox economic “laws”!).

    It also means that the possible rate of extraction is finite, which means that at some point the rate of extraction will peak and then decline. So as well as modelling the energy flows, it looks like it will be important to model the flow of primary resources to get a realistic feel for how the economy may behave in the future.

    My reading of the evidence is that we are reaching the limits of energy flows and primary resource extraction flows, so it looks like we are really at the begining of the Age of Consequences …

  6. Glenn Stehle says:

    @ Steve Keen

    Pleae don’t let people like F. Beard, Drew Priest or Ed Beaugard get you all tripped up with their Positivist faith, for, as John Gray points out, it “has all the trappings of religion” and “is more emotional than rational.”

    ? F. BEARD:

    I don’t see a problem with entropy for thousands of years at least since current energy technolgy or near current technolgy (especially thorium reactors) should suffice till then.

    This is pie in the sky stuff. Here’s an alternate viewpoint:

    “The dreams!” scoffs Norm Rubin, Energy Probe’s director of nuclear research and senior policy analyst.

    Thorium pitches are really just “appeals for public funding,” he says: “Thorium reactors are only one of a significant number of long-term dreams to plant soybeans in Antarctica with the help of nuclear sun lamps. There is almost no limit to the dreams you can have with an endless, too-cheap-to-meter source of clean, benign, what-could-possibly-go-wrong energy.”–thorium-touted-as-the-answer-to-our-energy-needs


    According to the equation for entropy of mixtures given above, separating copper should only cost ~$0.04/lb [assuming $0.10/kwhr and 1000K smelting temp.]

    Current spot price is $3.45/lb. This is much higher than what the 2nd thermo law requires.


    The major cost drivers are mine capital equipment, labor, transportation, and the energy required to break the chemical bonds of the ore, not the entropy change of extracting the ore.

    This ignores the fact that the manufacture of capital equipment, labor, transportation and the energy required to break the chemical bonds of the ore all entail their own energy inputs. Each perhaps employs different energy technology, but each nevertheless requires its own energy input and thus its own entropy change. The total entropy change necessary to refine copper would therefore be the sum of all these.

    The criticism that has been levelled against the thorium Utopians is also appropriate for Priest’s analysis:

    “Thorium doesn’t eliminate the problems,” he contends. “If the nuclear industry’s problem was affording uranium, then switching to thorium might solve their problem. But that’s not their problem. The fuel cost in today’s reactors is a tiny fraction of the total cost. That’s not what is giving the Ontario government sticker shock about the next two reactors at Darlington. They’re solving a non-problem by substituting a cheaper fuel for uranium. Unless they solve the big problems, they’ve got a curiosity there instead of a practical solution to anybody’s problems.”–thorium-touted-as-the-answer-to-our-energy-needs


    What I mean is, what exactly is the disaster that will befall us in the very near future?

    And if thermodynamics was completely true in the way we presently understand it, how did life begin at all?

    These statements are an indication of just how far this thread has slid into a ventilation of Positivist theology.

    For a discussion of some of the things that can go wrong to preclude the realization of the worldly paradise promised by the Positivists, I recommend the two following lectures given at The Science Network:

  7. Glenn Stehle says:

    I would also add that the type of energy technology a civilization employs goes a long way in determining the type of economic and political organization it uses, as well as the religious and secular ideologies it constructs in order to lend moral and intellectual legitimacy to that economic and political organization.

    As the historian Carrol Quigley points out in The Evolution of Civilizations, Classical antiquity was based on slave power. Thus its basic ideology—-Pythagorean rationalism and classical philosophy—-was constructed so as to give moral and intellectual legitimacy to slavery.

    But, as he goes on to point out, although Western civilization emerged from the wreckage of Classical antiquity, its technology differed from it in very it in important ways. Even in its early stages, Quigley states, Western civilization was “based on animal power rather than on slavery.” Thus a different religious system and basic ideology were necessary, and classical philosophy gave way to the scholastic synthesis of the medieval Roman Church. This provided sort of a truce, or a half-way point between classical philosophy (with its realist ontology and syllogistic logic) and philosophical nominalism (with its radical individualism and natural reality).

    As energy technology evolved even further to include wind (e.g. sailing vessels and windmills), water (e.g. water mills and hydroelectric), hydrocarbons (steam engines, internal combustion engines, turbines) and others (e.g. nuclear, solar), the scholastic synthesis itself became obsolete and slowly gave way to Modernism. Modernity’s promise was and is to “make man master and possessor of nature” and to free man from the curse of manual labor. And indeed, in the modern era human labor power has come to play a progressively smaller role in the civilization’s overall energy picture, thus partially fulfilling Modernity’s promise. If something should happen to our plentiful and inexpensive supply of energy, however, then the entire Modernist enterprise comes tumbling down, including the classical and neoclassical economic ideologies that underpin it and give it moral and intellectual legitimacy.

  8. RobM says:

    Hi Steve, I am long time admirer of your work.

    You are one of the few economists in the world trying to model the economy based on physical reality and sound mathematics.

    I would like to bring your attention to Timothy Garrett who is one of the few physicists in the world that is applying physics to model the economy.

    The two of you could do amazing things together.

  9. Steve Hummel says:

    I’m not a “true believer” in technology either, but even with peak oil we’ve still got a window, if a narrowing and precariously navigable window, within which we can still maintain a modern civilization. And the real key to not only giving us more time to innovate in order to find the new source of relatively cheap energy is to apply the anti-entropic human tool of Wisdom as the basis for both our self development AND our systems. That way even if we fail in our quest for a new energy source we can more wisely learn to live with the consequences.

    As I state in my Axioms of MESST (Monetary, Economic Sapient Synthesis Theory…whose philosophical basis for the concrete process of policy formation is the following four condensations of human wisdom: Faith as in Confidence, Hope, Love and Grace)

    “Within a paradigm of Faith, Hope, Love and Grace consumption means the most efficient meeting of goods and services with consumers, not excessive or wasteful production or consumption.”

  10. kalman says:

    Dear Steve,
    If you get a moment, I would love to hear your response to my comment posted on the 21st Nov. Very much appreciate you valuable time.
    With respect, Kalman.

  11. drew priest says:

    Steve, thanks for the positive response.

    I want to modify my respone to say that resource spot prices also depend on change in debt, asset speculation, and supply and demand, as you have clearly laid out in your many economics lectures. At $3.45/lb, this is an elevated price and has been encouraging mining investment since the price is well above production and delivery cost.

    Please allow me to expand further on my previous comment…

    Another point on entropy and energy flows is that sometimes energy losses to entropy are important, and sometimes they are not.

    My mining example was to show that the entropy change of extracting purified metals from unrealistically low grade ore is a negligible loss that would usually be lumped in the “miscellaneous” category. There is huge energy losses in that case, but it is not due to entropy changes of the mixture.

    Yet, for other cases entropy calcs are NOT negligible. In the case of a heat engine (car, truck, mining equipment, locomotive, power plant, jet engine, etc) these entropy losses are very important.
    The energy of the fuel is used to run the engine to convert that stored chemical energy (fuel) to mechanical (turn wheels, hydraulic pump, water crops, run electric generator, etc). The conversion process is dominated by significant entropy changes. Put simply, the heat engine’s energy flow is dominated by entropy changes.

    How does entropy dominate the energy flow of a heat engine? It goes out the exhaust -heat, cooling system -heat, and is loud -sound. The primary losses (cooling and exhaust) carry away ~30-70% of the chemical energy of fuel. Cooling systems make a lot of air slightly warmer. The exhaust makes a moderate amount of air moderately hot. This is the nature of increased entropy, these heat sources of radiator and exhaust air are very poor energy sources. It is very difficult to recover energy from these sources. The pressures and temperatures are just too low. Since the exhaust is moderately hot, we can get some energy out of it via turbochargers, turbo compounding, and combined cycle designs. But this extra energy recovered from the exhaust is typically a fraction of what is delivered from the primary design of the heat engine.

    Speaking generically, from memory…
    For a gas turbine engine, roughly 15-35% of the fuel energy is delivered to useable work. That is the PEAK thermal efficiency at full load. When idling, the thermal efficiency is ZERO. This is true for all heat engines.
    For gasoline/petro engines it is 20-35% peak. Diesels are 25-50% peak. Steam turbines are 35-50% peak. Combined cycle [gas turbine + steam] is 50-70% peak. Human body is ~13-17% peak (technically the human body is not a heat engine and is more like a fuel cell, but I have fun comparing it).

    In summary, sometimes entropy is an important calc, sometimes it is not. The decider is math and physics.

  12. Ed Beaugard says:

    Hi Steve,

    Thanks for your comments.

    I’ve said this before, and I don’t mean to be a nag, but for me, it’s a mistake to locate economics within ANY physical science, thermodynamics, systems engineering, what have you.
    I see this all the time on INET, where you have people happily applying statistical or mathematical techniques from the physical sciences as if that’s new economics, which it isn’t. It’s really a continuation of the spirit of the neo-classical program that Phil Mirowski talks about in his books.
    If economists do that(apply physics to economics, for example), then do they believe that Keynes was wrong in thinking that economics is a moral and not a natural science(to steal an line from Robert Skidelsky)? More likely, they probably haven’t thought about that question at all. But it seems fundamental to me.
    For what it’s worth, for me economics has nothing really to do with natural science, and complexity and chaos theory have no explanatory power within economics. Descriptive power yes, as you’ve shown in your brillant Minsky model, but it doesn’t explain anything that’s not already in the economic ideas that lead to the model in the first place. It(chaos theory, complexity, simulaneous equations, etc.) are just another form of question-begging.
    That is, something that seems to explain something but really doesn’t.
    However, I don’t have Diff Eq, so maybe I’m misunderstanding things in Minsky.
    And of course, maybe I’m completely wrong about all this, but no one’s ever really responded, even the people at INET.

    Well, I’ve pretty much made my point, so I’ll be quiet now.
    But I’m a huge fan of yours and if I could afford it, I’d be one of your monthly subscribers.

    Ed B.

    P.S. have you ever thought of starting a Social-democratic party?

  13. Steve Hummel says:


    Your points are well taken. All economics and finance are currently derivative. The only thing that will change them in any deep way is to apply the anti-entropic force of Wisdom to them. For instance, today we only have private and public credit creation, and they are also only applied to individuals via exchange (work), or borrowing (loans) and welfare (taxation and RE-distribution). We require a new form of credit creation, a social credit if you will, that is a gift (grace) and that is Distributive (created ex nihilo) not RE-distributive (taxed, some would say stolen, regardless it is an unnecessary burden). These are not derivative, they are different/new ideas/policies.

  14. Derek R says:

    It would be nice to have a mainstream economic theory explaining which of a range of actions was the most ethical one to take. Unfortunately we don’t even have a mainstream economic theory which can explain what the consequences for a range of actions will be and get them correct. Only when we get as far as being able to correctly predict that Action A will lead to Consequence B whereas Action C will lead to Consequence D, will we be in a position where we can compare the moral consequences of a range of policy options.

    Unfortunately we’re a loooong way from that today.

  15. Steve Hummel says:


    In order to have an economics which explains/encourages ethical ends you have to have it based on something other than profit (capitalism) or employment (socialism). With a system whose primary purpose is profit how can we expect anything other than increase from exchange? In modern life it colors most of what we do and think, unfortunately. Now if you based our economic, financial and monetary systems on the more universal ideas, values, purposes and experiences of Confidence, Hope, Love and Grace which are the condensations of all human wisdom you could have profit and employment take their proper place in the economy and yet policies which, if they were accurately bound back to these things, would actually encourage ethical results rather than inhibit them. No?

  16. Derek R says:

    I’m not arguing with that, Steve H. I’m just saying that even those people who have designed systems based on profit or employment have done a pretty bad job of it if we go by the evidence of the Soviet Union or of the West. And to my mind that’s because the designers have been working from flawed economics which can’t accurately predict effects from causes in all necessary cases.

    If you can design something based on Confidence, Hope, Love and Grace then that’s great. As long as it can be used to work out consequences from actions accurately. If it can do that then I’m all for it. That’s why I like Prof Keen’s work. It has some predictive ability on the monetary side. I still think that he needs to do more on the Land/Natural Resources side but that’s why I was very encouraged by this post. It shows that he recognises that need and is working towards fulfilling it.

  17. Steve Keen says:

    Hi Drew,

    Yes, that’s something I teach my students (or used to when I had an honours program!) as an introduction to entropy–I take them through the Carnot heat engine.

    In response to a number of other comments on this topic, I’m not suggesting importing physics concepts holus-bolus into economics. What I was arguing in that post is that the growth of production over time has to be explained in the context of the laws of physics. So they prove to be a very useful way to cut through the crap over theories of value that has wasted so much time in economics. But whether they do or don’t apply as limits that affect current production is very much an empirical question, as Drew outlines here.

  18. Steve Hummel says:

    “So they prove to be a very useful way to cut through the crap over theories of value that has wasted so much time in economics.”

    Quite agree. We should be aware of the dangers of being BOTH “blinded by science” AND subjective/religious values. Of course the integrated discipline of thinking and acting which is human wisdom, and which is also that most accurate approximation of our species designation, homo sapiens, is precisely what is needed in its most condensed and yet universal basics. It synthesizes and resolves both perspectives mentioned above. Sorry, but it bears repeating. Maybe if I embedded a different song or dance or other evocative sphere of human life with each mention of it, it might ring more true and seem less simplistic. Just use your imaginations.

  19. Ed Beaugard says:

    Hi Steve,

    “What I was arguing in that post is that the growth of production over time has to be explained in the context of the laws of physics.”

    Why are you locating this outside of human activity? Or are you?

    “So they prove to be a very useful way to cut through the crap over theories of value that has wasted so much time in economics.”


    Well, you’re definitely not a Wittgensteinian.

    Okay, I really will shut up now. But very much looking forward to what you say about all this.

    Ed B.

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