One of the economists who left a strong impression on me is Georgescu-Roegen. His argument about energy and economics was deeply convincing to me. So, energy should be included in an evolutionary approach to economics, but how does this relate with the fact of human creativity and knowledge? Actually, many critics of his approach always argued that energy certainly is a constraint on economic growth, but human creativity and institutions can overcome resource constraints, and one cannot possibly ground a theory of growth on physical principles, which would amount to misplaced reductionism.
I discovered my own solution of this conundrum when I studied the relationship between energy and information in the computer sciences. This leads back to Georgescu-Roegen’s foundational concept, entropy. Georgescu-Roegen only used classical thermodynamics as a framework, and rejected the statistical mechanics approach, hence the information theoretic foundations. However, I realized that both views can be reconciled in evolutionary theory, as has been proposed by many theorists in various contexts, such as in origin of life theories (for instance, Elitzur). Schroedinger’s classical physical definition of life as relying on exporting entropy to the environment is actually misleading as it suggests that the evolution of life works against the Second Law. In recent theorizing about maximum entropy approaches in the Earth Sciences (for example, in Germany Axel Kleidon) the idea is being ventilated that living systems have emerged as physical mechanisms that actually enhance and speed up dissipation of energy and hence entropy production in the universe. In this line of thinking, the accumulation of information in complex biological structures happens because this information enhances the capacities to harness energy throughputs in the context of natural selection. As a result, evolution is directed towards the ultimate goal of energetic dissipation, or, evolution is a direct physical expression of the Second Law, contra Schrödinger.
This is not the place to explore the details of this approach which I develop in full length in my ‘Foundations’. With special reference to Georgescu-Roegen, I published one paper that summarizes the argument for the audience of ‘Ecological Economics’:
- The Evolutionary Approach to Entropy: Reconciling Georgescu-Roegen’s Natural Philosophy with the Maximum Entropy Framework, Ecological Economics 70 (2011) 606–616 (penultimate version see pdf)
Information and energy are two sides of the same coin: I call this the ‘principle of bimodality’. This is an idea that was also pursued by Robert Ayres in his 1994 book ‘Information, Entropy, and Progress: A New Evolutionary Paradigm’. I pick up this thread of the argument which moved to the background in his more recent work on energy and economic growth, which I treat as the foundation of my aggregate-level theorizing. I think the difficulties in fully developing the ontological hypothesis of the unity of energy and information results from the fact that we continue understanding ‘information’ in terms of the Shannon framework, which is based on the analysis of communication in terms of standard notions of efficient causality (sender-receiver). If we adopt the much richer framework of a Peircian ontology, and approach information in terms of semiotics, we are able to understand the evolutionary dynamics of the growth of embodied information in the ‘tree of life’. For a concise summary, see the paper that I co-authored with Stanley Salthe:
- Triadic Conceptual Structure of the Maximum Entropy Approach to Evolution, in: BioSystems 103, 2011: 315-330 (penultimate version see http://arxiv.org/abs/1006.5505)
Why is all this important for economics? Firstly, I can show that the evolution of the human economy stands in continuity with biological evolution, because the evolution of technological artefacts follows the same evolutionary principles as the evolution of biological structures. Secondly, we cannot maintain the idea that knowledge aka information can be a substitute for other resources, or energy in general. To the opposite: The growth of knowledge is just the other side of increasing energy throughputs. This is actually easy to understand if we look at the history of the Industrial Revolution, especially in comparison to China. There is plenty of evidence (put together by leading historians, for example Robert Allen), that the ultimate root of the Industrial Revolution was the release of new energy resources by means of technology – and not institutions, political system, culture, religion etc. Thus, human creativity resolved a ‘hang up’ in the thermodynamic engine of planet Earth, freeing the energy stored in fossil resources. Then, economic growth can be conceived as the expression of the Second Law, as evolution in general. I have two new papers on these topics:
- Energy, Growth and Evolution: Towards a Naturalistic Ontology of Economics, Ecological Economics, 119, pp. 432-442, http://dx.doi.org/10.1016/j.ecolecon.2014.11.014 (pdf)
- Constitutive Explanations as a Methodological Framework for Integrating Thermodynamics and Economics, Entropy, 18, 18; doi:10.3390/e18010018 (pdf)