Energy, Production and Entropy

flattr this!

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 a professional economist 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 debts accumulated in Australia, and our very low rate of inflation.
Bookmark the permalink.

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.

Leave a Reply