Macroeconomic Dynamics in a finite world: the Thermodynamic Potential Approach (2204.02038v2)

Abstract: This paper presents a conceptual model describing the medium and long-term co-evolution of natural and socio-economic subsystems of Earth. An economy is viewed as an out-of-equilibrium dissipative structure that can only be maintained with a flow of energy and matter. The distinctive approach emphasized here consists in capturing the economic impact of natural ecosystems being depleted and destroyed by human activities via a pinch of thermodynamic potentials. This viewpoint allows: (i) the full-blown integration of a limited quantity of primary resources into a non-linear macrodynamics that is stock-flow consistent both in terms of matter-energy as well as economic transactions; (ii) the inclusion of natural and forced recycling; (iii) the inclusion of a friction term which reflects the impossibility of producing goods and services in high metabolising intensity without exuding energy and matter wastes; (iv) the computation of the anthropically produced entropy as a function of intensity and friction. Analysis and numerical computations confirm the role played by intensity and friction as key factors for sustainability. Our approach is flexible enough to allow for various economic models to be embedded into our thermodynamic framework.