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How Economists Can Use the Laws of Physics On the Example of the Notion of Entropy in its Application to Some Economic Conceptions

Liudmyla Vozna
Authors registered in the RePEc Author Service: Liudmila Yu. Voznaya ()

No 1_2016, STOREPapers from Associazione Italiana per la Storia dell'Economia Politica - StorEP

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 or a structure, a perfectly competitive market cannot exist. When analysing such a model, economists recognise its impossibility in real life from an empirical point of view. However, 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; Market Structure; Perfect Competition; Uncertainty; Information; Disorder (search for similar items in EconPapers)
JEL-codes: B4 D4 D8 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2016-12
New Economics Papers: this item is included in nep-hme, nep-hpe and nep-ore
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