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This review includes: 1) Review, 2) guide to related books 3) some citations, and 4) table of contents. The first 9 chapters he discuss the historic developments in philosophy of science, physics and economics. This leads him to conclude that standard economics is founded on analogies to newtonian mechanics. He explores several problematic aspects of this line of thought. These includes the problem of defining the boundaries of the economic process, the problem of treating qualitative changes within the mechanical framework. Within physics the theory of classical thermodynamics, was to revolutionize the discipline of physics. The first law of thermodynamics stated that matter-energy cannot be created nor destroyed. This was not in conflict with Newtonian mechanics. The second law of thermodynamics states that within a closed system the availability of matter-energy decreases. This second law conflicts with classical mechanics, in the way that this process can only consist of a qualitative change. The first part of the book is deals primarily with philosophical and physics issues, and although NGR was economist himself - these discussions are very hard to grasp for a social scientist, as myself. The second part consists of an analysis economic theory (Marx, Marshall, Leontieff and others), founded on the conclusions reached in the first part of the book. The general conclusion is that it is unreasonable to believe that the economic process can defy any laws of physics. At present economic theory ignores the second law of thermodynamics, leading to an uneconomical use of our physical surroundings.Read more ›
There are many great criticisms of neoclassical economics in this book. Georgescu-Roegen (G-R) points out such flaws as @ regarding the economy as a closed, circular system; @ neglecting qualitative changes because of the theory's preference for "arithromorhpic" concepts, i.e., concepts organized into distinct and non-overlapping gradations (such as preference/indifference/non-preference), rather than having fuzzy edges or ambiguities (such as real human preferences); @ failing to attribute value to leisure, and negative value to the drudgery of work (albeit that assuming work must involve drudgery is itself based on some presuppositions not mentioned by G-R); and @ fallacies in production models, "stock-flow" analysis and input-output tables. The critique is usually presented with a refreshing brio. G-R isn't afraid to call ideas stupid when he believes them so.
But ... a lot of this book seems to go off the track. There is way more discussion of history of math and physics than seems necessary. Lengthy discussions of eugenics and cloning near the end of the book kind of come out of nowhere. Much of this, especially the biology, is by now very dated, and even that which is less so is often superfluous and bombastic. Some readers may think G-R prophetic because of his occasional allusions to solar power, and I was surprised to see him use the expression "nanotweeze" (as a noun) in 1971 (@351) -- but the book is wrong about so many other forward-looking details that these seem almost like lucky guesses, given the wide range of topics G-R drags into the book.
More substantively, G-R's understanding of physics was quite loose and often wrong. He errs when he talks about how "our whole economic life feeds on low entropy" (@277).Read more ›
Georgescu-Roegen argues that neo-classical economics(the dominant form of economics at this time) is not consistent with fundamental physical laws. The law that NC economics is most in conflict with is the Second Law of Thermodynamics, the entropy law. NE Economics assumes that continuous economic growth is both desirable and possible. According to Roegen any economy is permanently physically limited by the supply of low-entropy matter and energy as a source for raw materials and as a sink for our wastes. The only possible long-term source for low-entropy energy is the sun and even this is available at a limited rate of flow.An attempt at steady-state economics (as espoused by Herman Daley) would be a significant improvement over the present situation, but would still not be possible in the very long run because of limitations on the supply of low-entropy raw materials such as metal ores.Roegen's point of view is fundamentally in conflict with current economics, but we ignore his arguments at our peril. In the not terribly distant future we will run up against the limits that Roegen warns of.The book is dense and difficult, but the concepts are extremely important...More readable books on the subject are "Beyond Growth" and "Steady-State Economics" by Herman Daley.
It must be admitted that Georgescu-Roegen's understanding of entropy was flawed. He, along with many other authors including physicists, thought entropy was a measure of disorder. It is not. That entropy is not a measure of disorder is discussed in a recent scholarly article by chemistry Prof. Frank Lambert, who has a nice web site devoted to the topic. More to the point, it was also discussed in Beard and Lozada's book about Georgescu-Roegen (p. 88, "Economics, Entropy, and the Environment: The Extraordinary Economics of Nicholas Georgescu-Roegen"). It's not easy to say what entropy actually is, but it is straightforward for scientists to measure that, say, the standard entropy of one mole of iron (about 55.8 grams of iron) is 27.7 Joules per Kelvin.
While Georgescu wasn't completely right about all of entropy's aspects, his attacks on Boltzmann's H-Theorem, and on the "information as entropy" school, show completely correct understanding of other aspects of entropy. Furthermore, in his indictment of neoclassical dynamic economics, he was the vanguard of critics who decry slavish devotion to mathematical models which assume we know the future (at least probabalistically). Absorbing Georgescu's lessons would've spared Economics Nobel Laureates Merton and Scholes their disastrous experience running the failed hedge fund Long-Term Capital Management (described in the book "When Genius Failed"): change happens, the past does not always predict the future, and the consequences of one's actions sometimes cannot be imagined by anyone. When investing money, that's a good perspective; when talking about man's effect on the environment, as Georgescu was, it's a perspective that could save the planet.