Are there biophysical limits to technical change? A review of societal exergy analysis and ecological macroeconomics

Simon Furse

No 259/2025, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: This paper examines two literatures that try to understand the biophysical constraints placed on the economy and economic growth. Firstly, exergy economics uses the second law of thermodynamics to examine the aggregate exergy conversion process to the useful stage. This shows the dependency of the economy on physical laws and highlights the limits to continued productivity growth. I argue that exergy economics provides a vital contribution to economics, but previous attempts to integrate it into an economic framework are undermined by a reliance on the neoclassical production function. Secondly, ecological macroeconomics examines biophysical constraints to the economy using heterodox economic theory and models. My review of this literature shows that productivity growth is often modelled as unconnected to energy and materials and able to increase exponentially into the future despite biophysical constraints. The paper argues that biophysical limits to productivity growth need to be considered alongside the more commonly modelled damage functions and limits to resource availability and quality in ecological macroeconomics.

Keywords: Exergy; Energy; Societal Exergy Analysis; Ecological Macroeconomics; Technical Change; Production Functions; Limits to Growth (search for similar items in EconPapers)
JEL-codes: E12 O44 Q43 Q57 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:324638

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