Ecological Economics: An Analytical Thermodynamic Theory

Abstract

More and more researchers in ecological economics have recognized that the biophysical approach provides a better foundation to understand human society and its long term evolution than mainstream economic theory. However, ecological economics textbooks are still written from the mainstream economics perspective. This is largely due to a lack of analytical theory in ecological economics. One would expect that an analytical theory based on sound physical foundation would provide a clearer understanding of our daily activities than mainstream economics, whose foundation has been challenged by more and more researchers. This is indeed the case. In this paper, we present a newly developed analytical thermodynamic theory of ecological economics and show how it provides much more realistic and intuitive understanding of economic, social and biological phenomena than mainstream economic theory. This theory turns the insights from ecological economics into an analytical model that can be applied to day to day business activities. It will help transform ecological economics from a niche subject into the theoretical foundation of social sciences.