The Notion of Entropy in an Economic Analysis: the Classical Examples and New Perspectives

Vozna Liudmyla Yu. ()
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Vozna Liudmyla Yu.: Ph. D. in economics, Independent researcher, Ukraine (Italy)
Authors registered in the RePEc Author Service: Liudmila Yu. Voznaya ()

Journal of Heterodox Economics, 2016, vol. 3, issue 1, 1-16

Abstract: This article deals with the notion of entropy in its applicability to economics. Briefly, it regards some classical cases of such a use as the labour concept of Podolinsky and the bioeconomics of Georgescu-Roegen. This article also attempts to apply the concept of entropy to the analysis of market structures in the example of the perfect competition model. Thus, the article asserts that if we compare different entropy concepts with the main characteristics of a market with perfect competition, we must conclude that the latter is a structure with the maximum level of entropy. But maximum entropy means the system’s death. So, as a system, a perfectly competitive market cannot exist. Despite economists recognise the unreality of such a market from an empirical point of view, the application of the entropy concept helps us to repeat this approval also as a methodological one. The use of the entropy concept as a methodological instrument helps to question some other economic models, too.

Keywords: entropy; the second law of thermodynamics; uncertainty; market structure; perfect competition; disorder (search for similar items in EconPapers)
JEL-codes: B4 D41 D8 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:joheec:v:3:y:2016:i:1:p:1-16:n:1

DOI: 10.1515/jheec-2016-0001

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