Georgescu-Roegen's Flow-Fund Theory of Production in Retrospect

Abstract

This paper provides a synthetic account of Georgescu-Roegen's flow-fund theory, as a contribution to the history of ecological economics. It reconstitutes Georgescu-Roegen's perspective on production, and its relationships with other frameworks, such as the neoclassical production function and input-output tables. The overall purpose is to clearly establish the foundations of the flow-fund theory, and to introduce the research perspectives it opens for ecological economics. The paper puts particular emphasis on the relationships between the flow-fund framework and two other aspects of Georgescu-Roegen's thought. First, his methodological perspective on economics, and the role of mathematical models, allows for a better understanding of the foundations of the flow-fund theory. Second, this framework incorporates Georgescu-Roegen's interest in the physical dimension of the economic process and the implications of the laws of thermodynamics. Overall, the paper concludes that the flow-fund theory has solid foundations, and thus represents a credible alternative to standard theories of production. However, in order to show how this framework can shed light on contemporary issues in ecological economics, more applications are needed, especially at the theoretical level. The main challenge for future research is to develop such applications while trying to be faithful to the foundations of the flow-fund theory.