Economic entropy

In economic thermodynamics, economic entropy is conceptual term used in various ways to represent entropy in economic systems.

In 1910, Italian economist Emanuele Sella was outlining some type of idea of elementary economic entropy.

In 1914, American mathematical economist Harold Davis, in his 1941 book The Theory of Econometrics, conceptualized the term "economic entropy" as "relating to or representing the utility of money". [1] Earlier views, however, on the idea of elementary economic entropy were outlined in 1910 by [4]

In cross-over terminology to that of the phraseologies related to standard entropy, some will argue that each step in the reduction of economic entropy (in the economic system) is made at the expense of an increase in the entropy of nature (of the surroundings). [2] In other cases, which seem to have little connection to thermodynamics, completely unfounded definitions can be found. American mathematical economist Antal Fekete, for instance, states that economic entropy is defined as “the measure of the disappearance of uncertainty and risk”. [5]

In modern terms, some have taken an organismic-view of society and have argued that according to the second law of thermodynamics, it can be deduced that inside of each organism the “economic temperature”, a term coined by Emanuele Sella (1915), which can be read therefore as wealth and the capacity to absorb it, is distributed uniformly; but that between different organisms a thermoeconomic diversity (or temperature difference) exists. [3] Hence, according to author Guido Erreygers, for instance, when such supra-organisms associate, a thermoeconomic leveling process proceeds and that society has a total economic entropy or “a limit saturation to which the competition process tends as a result of the diffusion of the economic temperature through the organic series”. [3]

Darda models
Two examples of 1997 economic engine models of Serge Darda. [6]
In 1997, Russian-American business researcher Sergei Darda (ΡΊ), in his “Entropy and Economy”, argued that a business may be considered as economic engine that produces a product or a service, according to which economic entropy can be calculated as: [6]

dS max

where NImax is net income of the business and Ce is equilibrium cost to produce a unit of the product or service.

1. (a) Davis, Harold T. (1941). The Theory of Econometrics, (pg. 171-76). Bloomington.
(b) Georgescu-Roegen, Nicholas. (1971). The Entropy Law and the Economic Process, (pg. 17). Cambridge, Massachusetts: Harvard University Press.
2. Dolan, Edwin G. (1971). Tanstaafl, (pgs. 9, 104-08). Holt, Rinehart and Winston.
3. Erreygers, Guido. (2001). Economics and Interdisciplinary Exchange, (pg. 162). Routledge.
4. Sella, Emanuele. (1910). La Vita della Ricchezza [The Life of Wealth]. (pgs. 67-68).
5. Fekete, Antal E. (2005). “Economic Entropy – Revisionist Theory and History of Money”, Financial Sense Editorials, Oct. 09.
6. Sergei Darda. (1997). “Entropy and Economy”,

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