Economics as Energy Framework: Complexity, Turbulence, Financial Crises, and Protectionism

When two closed systems are brought into communication to form a single open system the second law of thermodynamics forces energy to disperse. In Fig. 7, the pressure differential forces water to flow from the full tank into the empty tank. In economics, we would call this arbitrage. Both represent an open systemmoving toward its lowenergy equilibr

Prigogine later was awarded the Nobel Prize in chemistry in 1977 for showing that distance from equilibrium is an important and fundamental parameter of nature. As the distance from equilibrium and the corre- sponding temperature, pressure, or energy gradient increases

Markets facilitate the energy transformations that result in work by distributing information on relative scarcity using symbols we call prices. People respond to price, wage and return differences, or gradi- ents, that signal profitable opportunities to redeploy resources. In flow markets, we call the result supply and demand. In asset markets, we c

Schneider and Sagan (2005) argue that complex nonequilibriumthermodynamic systems—societies, political systems, ecosystems, and economies—share a universal feature; they regress to earlier, more hierarchical, less complex and less open forms of organization under conditions of environmental stress such as plagues, wars and depressions. This propert