Concepts of Thermodynamics in Economic Growth

Summary

The Solow-Swan model of economic growth is reviewed on the basis of natural production. Natural growth is a biochemical process based on the laws of thermodynamics. Economic production - like work in thermodynamics - is a non exact differential. The production function Y (a, b) as a function of laborers (a) and (b) depends on the path of integration. The production function may be calculated for the special processes like constant mean capital per labor (T), (which corresponds to the Carnot process in thermodynamics): Y (a, b) = L{ak + bl + T(ln{a ^a b ^b}){. The elasticity coefficients or exponents a, b with a + b = 1 are determined by the production factors! The production function Y (a, b) has been applied to optimizing production processes in farming and leads to a Boltzmann distribution of production factors. The main source of economic growth is entropy, the chance of diversification, the variety of know how and ideas. The results lead to a new model of economic growth for interdependent economic systems like Japan and the US, East and West Germany, North and South America, and agrees well with data for these economies.