A note on thermodynamics of the production processes

Abstract: The process of creating goods and services, measured by their value, is considered as a process of creating complexity. This makes it possible to consider the production system as an open thermodynamic system, and to develop a simple heuristic model for the production process. The model includes three production factors: the index of complexity of production equipment (physical capital $K$), human activity (labour $L$), and the substitutive capacity of equipment (substitutive work $P$). The latter is a contribution to economic theory from the thermodynamic approach, which also requires the introduction of technological characteristics of production equipment, such as labor requirement ($\overlineλ$) and energy requirement ($\overline{\varepsilon}$), which indicate the amounts of labor and energy required to operate production equipment. By applying thermodynamic principles to the theory of production, we can understand how labour can be replaced by capital, and derive the production function in four equivalent but different formulations. Two of them are known and used by economists for interpretation the production phenomena; the thermodynamic approach gives some foundation for economic theory. The production function allows an unambiguously decompose of the growth rate of output according to the growth rates of production factors and technological level. The introduction of substitute work as a factor of production and technological features of capital expands planning and analyse of production processes.