Electronic copy available at: http://ssrn.com/abstract=969980 Electronic copy available at: http://ssrn.
com/abstract=969980 Electronic copy of this paper is available at: http://ssrn.com/abstract=969980
Application of the Main Laws of
Thermodynamics on the Economy
. Jürgen Bennewitz
1)
Abstract
The main laws of thermodynamics are explained with respect to economics. Ex
pressions like entropy, exergy, anergy, inner energy and free energy of economic
systems are defined qualitatively as well as quantitatively. The first and second law
are quantitatively deducted for their application in the economy. The quantity en
tropy is treated very thoroughly and it is shown that the entropy increase of eco
nomic systems is directly proportional th the value added. Entropy, free energy and
inner energy are the most regulating factors of economic processes. It is shown
quantitatively on the basis of realistic company data what the outcome of a merger
of two companies can be. The appendix shows the details of an entropy tax which
could be very much of interest solving environment problems as for instance the se
rious climate problem.
Keywords: Laws of thermodynamics in the economy, entropy and economy,
inner energy and economy, free energy and economy, proportionality
of energy and money, quantitative treatment of merger processes,
entropy tax.
JEL Classification: A1, A12, C0, F0, G3, G34.
1
Jürgen Bennewitz, EMail : JH.Bennewitz@tonline.de
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2
Contents Page
Preface 3
1. Introduction 9
2. General Remarks
2.1 Systems of Ecodynamic 15
2.2 Energy Types in Ecodynamic 18
2.3 State Functions in Ecodynamic 21
3. The Laws of Thermodynamic and Ecodynamic
3.1 The Zeroth Law 24
3.2 The First Law
3.2.1 Exergy and Anergy in Ecodynamic Systems 25
3.2.2 General Treatment of the First Law 27
3.2.3 Quantitative Treatment of the First Law 32
3.3 The Second Law
3.3.1 General Treatment of the Second Law 42
3.3.2 Quantitative Treatment 1 of the Second Law 45
3.3.3 Quantitative Treatment 2 of the Second Law 50
3.3.4 Quantitative Treatment 3 of the Second Law 56
3.3.5 Exergy, Anergy and the Second Law 61
3.4. The Properties of ““ 64
4. Free Energy of Ecodynamic Systems 71
5. Ecodynamics of binary Economic Systems
5.1 Basics 75
5.2 Inner Energy of binary Economic Systems 78
5.3 Entropy of binary Economic Systems 81
5.4 Free Energy of Economic Systems 84
5.5 Example: Calculation of a Merger 89
6. Appendix: Entropy Tax 94
FormulaSymbols and Constants 100
Glossary 102
Literature 105
Electronic copy available at: http://ssrn.com/abstract=969980
3
Preface
Why was this monograph ever written?
The answer to this question is very simple: I am worried about the future of our married
children and grand children; I am worried about the future of mankind. Why I am worried?
This I will sketch in the following. Every paragraph would be a book in itself if elaborated
in detail! This study shall be my part to work for a better future.
1. Problems of Survival
I think and I believe if we, the present generation and the next one are not able or willing to
solve the problems I shall list only with catchwords and by no means complete, we will not
have too much hope for a good living of future generations. This study is actually the des
perate attempt of someone who thinks to know where mankind is going to end, to be of just
a little assistance for solving our problems. Here is what worries me:
The law of entropy dictates the direction of everything that happens in our world. Every
thing depends on the law of Entropy, which is the law of irreversibility, too. Our time is ir
reversible the same way as the transfer of useful energy in unuseful energy is irreversible.
This irreversibility of all of our doing is probably one of the main problems for us to un
derstand what goes on in this world.
Unsolved is the problem of the expansion of the world population. By the middle of this
century we will have almost 10 billion people living on earth. The mass will not be in the
industrialized countries – but in Africa, India, South America, Indonesia, and China. Not
far from 5 billion of them will be below the age of thirty years. Theoretically they could
overrun the industrialized nations. Theoretically?
Will the socalled less developed countries be able to solve their problems by themselves?
Do they have the knowledge and the means to do it? I think the answer is a simple no. Is it
possible to cut short a cultural and scientific development of 10 thousand years, as we ex
perienced in our so called developed countries compared with people of the Congo, who
just had only two or three or even four generation for such a development? These people
there can use a Kalaschnikoff, but they cannot calculate the area of a square, they cannot
develop the agricultural methods or means to feed themselves, with their increasing num
ber, just by themselves. Everything that is done in all these mentioned regions in the way it
is done today will only increase the entropy of the world by irrevocably decreasing the
chances for a living tomorrow, simultaneously.
One hundred years ago we had 5 cities on the globe with more than one million people liv
ing there. Now we have probably more than 500 cities with more than 1 million people.
The UN says that before 2010 about half of the world population will live in cities. This
would be more than 4 billion people! Probably 80 % of them will live in mega million cit
ies. The slums will increase but not decrease.
Our present world economy is almost a disaster, how can this economy solve the problems,
which arise in front of our eyes if we go on like we do now? The whole development, as it
looks today, will be an uncontrolled dramatic increase of entropy, irreversible, irrevocable.
4
What will be the consequences of our ecological problems like pollution of our environ
ment, green house effect, exploitation of tropical woods, etc. for the development of the
entropy? Only the green house effect will probably have disastrously consequences on our
climate. The limits of water supplies are reached in many countries, clean drinking water
will become a rarity for more and more people. The production of food will probably not
keep up with the increase of the world population. In any case we will have a “Chain of
Entropy Increase” caused by increasing amounts of fertilizers and increasing machinery for
farming, increasing food manufacturing, increasing transportation etc. Can we really feed
10 billion people on earth when we also destroy our resources of fish in the oceans? An
other problem is the degradation of farmland. Today the world depends to a large extent on
the food production of the USA. In the underdeveloped countries the food production does
not keep pace with the increase of the population. Where we look at, everything requires
more and more energy and therefore results in an increase of entropy.
The polarization of the poor and the rich has increased during the last decades. The gap be
tween the industrialized and the lessdeveloped countries has almost tripled within the last
50 years and it seems to increase further. The netvalue of the about 360 richest people of
the world corresponds to the capital property of about 2,3 billion people of the poor. The
socalled equality of chances turns out to be a game in which only very few win and the
masses are asked to be good loser. But the few are the ones responsible for the increase of
entropy – not the losers.
Who has not enough knowledge, who has no chances to get some education or to learn a
profession has no chance for a job in our reckless world. Are the abilities of workers get
ting better with an increasing income or is the carousel of the everincreasing income (for
some?) just the carousel of increasing entropy? Two thirds of the analphabets on earth are
women! And where and what is the positive influence of the media (TV) on education?
How does the number of scientists in the industrialized countries compare with the number
of scientists in the lessdeveloped countries? How many scientists have lived in the world
let say around 1800 and how many have been there in 2000? In 1800 there were about 1,2
Billion people living on earth in 2000 we had already 6 billions. Let it be a few hundred
thousand scientists in 1800, today there will be many millions. And what is the result of all
the gain of knowledge except for a tremendous increase in entropy? Does this increase runs
parallel to the increase in the standard of living etc.? It certainly does not. The increase of
entropy is exponential. One of many other reasons for this is that “special scientists” create
the desire of man for more goods than are necessary for life. The bad education and the
stupidity of the mass of man is very dangerous, even for the entropy development.
Is the economic growth as postulated all the time really necessary? A certain growth must
surely be, just because of the growing population and the necessary shift from poor to less
poor at least. Although we don’t see to much success in this respect. But the remaining
economic growth looks very much like one with the aim just to increase luxury. The dis
parity of this growth between the rich and the poor countries increases. A very serious
question that is postulated by the UN is that human development depends only upon the
economic growth. I would say it depends not on growth as defined in the economy but on
the economic development of the respective areas. Economic growth as a method minimiz
ing excessive indebtedness of households and minimizing unemployment has as a first eco
nomic consequence an increase of entropy with the result of damaging the economy
because of destroying valuable resources by a transfer into anergy. It is a question if the
highincome countries really need further economic growth. Where shall this end? Is this
thinking based on a sound knowledge or on faith? If one thinks it is faith then it looks like
5
mistaken belief. In any case, this belief underestimates the importance of entropy in our
life. It is also a serious question if the rich really want to give something to the poor and to
let them participate. It looks that this is only as long the case as it brings a profit to the rich.
In the less developed countries the population raises faster than the vacant workplaces, the
number of young people exceeds the number of the old. This is a dangerous development
with the result that in these countries the young work in the socalled informal sector and
in households. No one really knows who is unemployed and what is the definition of un
employment in the various countries. It looks that the promotion of capitalintensive indus
tries in the poorer countries has just positive results only for the provider of the capital but
probably a negative result on the rate of employment in these countries.
According to the UN it is a fact that about 1,5 billion people in the developed countries
have had an increase of income of about 7 % per annum in the 80
th
(i.e. doubling the in
come in 10 years) while more than one billion people in this world have had a considerable
decrease in income within these 10 years. In the last 35 years, the world trade of goods has
tripled but the world’s service volume increased by a factor of 14! Since 1990, the former
socialistic countries had practically a decrease in the per capita income – regardless of the
increase in expenditures in military investments. The world production has increased dur
ing the last hundred years by a factor of 11, while the population “only” increased by a fac
tor of 3.5. A tremendous increase of entropy all over the world but no solutions of the
problems of this world, that’s what it looks like.
If we have a short look at the World Bank and the IWF, it is without question that these in
stitutions have had many positive results with their work. Other results were less positive
and many of them can be related to the catchwords of the foregoing paragraphs. Many of
the investments resulted in a higher increase of entropy than probably necessary. The inter
est in projects that cost money but don’t bring a good return on investment, like for health
or education, is rather limited. However, these are the projects, which would pay off on the
longer run; these would be the projects to bring down the increase of entropy to a reason
able level.
The BSP, the gross national product, is called to be the measure of the measures. Is that so?
It is certainly not a measure of the necessary increase of entropy for a sound economic de
velopment.
One of the main sources of unnecessary products is still the military expenditure. If one
looks in this connection at the undeveloped countries which export military goods while
their citizens almost starve or have only very restricted access to goods which are in other
countries nothing special then one can only shake the head about this military money mak
ing in general. This is really energy dissipation and excessive entropy generation.
Recycling is another subject one should look at closely to find out where it is economically
reasonable and where not. Just looking at the final recycling process does not do it but it is
necessary to check the energy balance of the whole process from collecting in a household
or a factory up to the distribution of the recycled product. There are many question marks
and the unnecessary entropy production looks rather high in this field.
We shall close this row of catchwords with a few remarks on the general energy supply of
our world. There is no question that our fossil resources – coal, oil and gas  will get to an
end sometime in the future. If this will be in 25, 50, or 75 years that is not the point. The
point is that this point will come, irrevocably, and by all probability before the end of this
6
century, maybe even long before the end of this century. This will be the case even with
much more forced expansions of the renewable energy resources like wind, sun and water.
They cannot fill the gap, which is left by the fossil energies. That this is impossible can be
shown easily by physical calculations. Just only two other examples where the renewable
energies won’t help at all: First, almost all of our pharmaceutics are based on coal, oil or
gas. Chemically the only way to get them. Second: Our clothing is made to a large extent
of coal, oil and gas. The sheep of Australia or the Faeroe Isle or the cotton harvested on
the world won’t do it for 10 billion people. If in connection with the energy question, some
politicians of certain political parties request a minimum of one million years for safely
storing radioactive wastes it is breathtaking. If we go on like we do presently there will be
nothing for heating or cooling our houses or even our bodies in much less than 1000 years,
maybe less than 500 or even less than 100 years.
How can we solve all those overwhelming problems we have only sketched? To answer
this fundamental question we have to acknowledge that the thoughts of this study could be
only a grain of a mass of necessary grains of measures – but an very important grain!
2. Entropy Identity
Question: Is it possible that we can arrive at a world society that is entropy cautious?
Answer: Yes it can be possible  but we all have to change our thinking: The UN, the gov
ernments, the politicians and finally everyone who is living on this planet and who thinks
responsible of his children, grandchildren and grandgrandchildren. We have to think over
our democratic rules and our personal behaviour. It is probably a very hard way we have to
go, and probably not always a very pleasant one. However, there is no way out, to solve
our climate problem, our energy problem – our problem to survive.
Every human being is asked to identify himself with the problem that our future life de
pends basically on the task to reduce the increase of entropy to the smallest possible but
necessary amount. This requires making this problem understandable to practically every
body. We have to find the means to develop an entropy identity as a basis to understand the
problem and to work on its solution. We have to find the technical and the psychological
tools to explain the entropy problem first and than transfer it in an entropy identity. This
will be a tremendous task. However, would be it not a thankful task better than fighting
wars or being drowned in luxury etc.? It would be a task where we could solve very many
of the problems along the road as sketched before.
For this we have to direct our doing to an identification with the problem. The entropy
problem must be explained in a way that everyone who is willing could understand it. We
have to make it clear that we are not doomed if we tackle the entropy question and define
an aim to strive for. Only then the entropy problem will be accepted as such and an entropy
identity can develop in time, but certainly not until to tomorrow. I think that this should be
The Task of world politics, of the UN, of all responsible politicians in this world independ
ent of boundaries between countries, independent of languages, independent of colour.
To solve the entropy problem would take so much time that there would be not a second
left to fight wars. But in the first place, we have to convince some billions of people. I
7
hope that not already the very first of all steps i.e. to convince the scientists and experts of
economy of this study will be unattainable.
3. My Own Position
During the first 20 years of my professional life, my work since 1946 shifted from sole sci
ence gradually to management, first technical management then later more and more gen
eral management. But I kept always two fields of interest within my reach. These were and
are general questions of the world energy supply and the field of thermodynamics that was
already my favourite subject as a student of chemistry and later of physical metallurgy.
Becoming more and more a manager I had to learn economy from the ground level of book
keeping and financing, how to organize companies up to questions of sales. Already
around 1970 I asked myself if there are any possible connections between the questions of
economy and the science of physics and thermodynamics. Soon I concentrated on looking
for connections between thermodynamics and economy. Looking through my early notes I
found an unpublished paper (1977) with the title “The free Enthalpy of Industrial Compa
nies”, which contained one unsolved problem: I did not know what to do with the thermo
dynamic temperature. I was convinced that with the quantity temperature there was no way
to arrive at a closed logical system of economy and thermodynamics. It took me about 10
more years to find the solution to this problem as shown in this study.
Then I had another problem, which I still consider as a very serious one. I tried during the
past 15 years to get contacts with scientists in the field of the economy. It was annoying
and frustrating. I finally gave up more or less. I have tried to contact more than a hundred
institutes, professors and so on. In more than 50 per cent I even did not get any answer at
all, some times just a confirmation of the reception of my letter or a note of “no interest”. I
had one very interesting and intensive discussion with an outstanding and very well known
scientist of economics. In this discussion, I learned one very important lesson, which is
probably the key to this: It is the problem of understanding physical and thermodynamic
thinking in economy. It seems to be very difficult to introduce this thinking into the science
of economy. Why?
If one looks at the different schools of thinking of the members of different sciences or
technologies one discovers many facts that make it difficult for these members really to
understand one another and communicate with one another if they don’t try, really. If a
philosopher and a theoretical physicist talk about time, they talk with very great probability
about different worlds even though they try to understand each other. It is not very long
ago that even physicists had different opinions on the relativity of time with respect to the
theory of relativity of Einstein. The basic school of thinking in economics is very different,
if not extremely different, from the thinking of a physicist, a chemist or a mathematician.
And even among those three differences exist. In addition, the economics have certain ba
sic and social standards dictated by their thinking that makes it difficult to introduce a
principal natural law. But I think that natural laws are valid everywhere and I believe that
especially the basic laws of thermodynamics are valid in every scientific field and that they
rule our life if we like it or not. The point is like in all other phases of life among human
beings, that we have to accept this and that we cannot live against the laws of nature. We
have to accept that each science cannot do without the other ones. Therefore, it should be
8
an aim to strive for a mutual understanding. In our special case, we try to use the rules
given by the thermodynamics as basic rules of nature to apply them as far as at all possible
to our daily economic life.
4. Remembrance
The question asked at the beginning of this preface reminded me of an unforgettable ex
perience. In 1964, I had submitted a paper to the International Conference on Creep held as
a Reporter Conference in London. Reporters were outstanding scientists for the specific
fields in question. The morning my paper was due I was sitting with my wife in the audito
rium waiting for the report on my paper. Then it happened before my paper was due. A re
porter glanced over the several hundred listening scientists in the auditorium cleared his
throat and said pronouncing in best Oxford English: “As for the paper of Dr. X.  pause  I
am very sorry that this paper was ever written!  Pause  I go on to report on the next paper
of Mr. Y.”
I think the total lack of tolerance as toward this scientist Dr. X, who gave his best, has in
creased in the past decades to such an extent that is almost unbelievable. This is something
of which I accuse the development of our society. Somewhat later, after that remark, my
paper was reported on and as far as I remember it was a good report but the shock about
that remark was still shaking me. That evening my wife and I had a very good dinner in an
Indian restaurant in Soho.
5. A Final Remark
At the beginning, I asked the question: Why was this study ever written? The answer is: I
try to do my best I can to help mankind striving for a positive future. It’s only a grain, but
many grains can very often do good things. I have just one hope: That nobody will ever say
what that reporter in London said at that conference in 1964. However, if someone says it
he should at least give exact explanations. That’s a main point I am missing in all my tried
connections.
Before I close this preface, I like to make the following special remarks about the basis of
this study. The epistemological work of N. GeorgescuRoegen (19061994) of the 60
th
and
the 70
th
were very important to me after my not very successful attempts in the 70
th
and
80
th
, i.e. before I read the first time of GeorgescuRoegen exactly in fall 1993 in an article
of the paper DIE ZEIT. The next breakthrough came after solving the question of the re
placement of the temperature in economics, some time around 1994/95 introducing a con
stant. Finally, the possibility of the application of the ‘Thermodynamic Analysis’ devel
oped in the early 50th by my admired teacher Prof. W. Oelsen (19051970) was the point
where I had the feeling that I had succeeded. Without the both gentlemen, N. Georgescu
Roegen and W. Oelsen, I probably would have not arrived at the results of this study.
9
1. Introduction
The global economic development since we started into the new century is anything but
satisfying. But is it really a new development in this 21. Century? Was the 20th Century
economically a sound one? Was the 19th Century a sound one? Certainly not. But one gets
the impression that the economic problems start to accumulate to an extent that seems to be
rather dangerous for the further development of the species of human beings. Looking at
the past we clearly see one reason for this trend: 10.000 years ago there lived about 120
million people on the globe, 1.000 years ago there were only about 4 times more men liv
ing on our planet, 480 million. Just 100 years ago there were all together close to 2 billion
and now the number of people living on earth comes close to 6.5 billion with the rather
worrying prospect that we will have a crowd of intolerant, selfish, ignorant and rather reck
less of 10 or more billion human (?) beings within the next thirty or forty years fighting for
living on the same surface of our planet and under the same sky as 10.000 years ago.
We have about 86 Million km
2
Land available on earth to live on. That was 2 acre (0.72
km
2
) per capita 10.000 years ago. Today it comes to 0,04 acre (0,0132 km
2
) that is 2 % of
those 10.000 years ago. The 86million km
2
land consist of woodland, farmland and pas
ture land, they remain constant in a first approximation while the world population ex
plodes exponentially. About one hundred years ago no automobiles, no airplanes, no tour
ism, no globalization of industries, just 5 cities in the world with more than one million
people, now we have more than 500 cities with more than 1 million people living there,
even up to 20 or 30 million in some of them. Roughly half of the world population will
soon be living in cities! It is almost a neverending task just to list the problems, which
arise only by these facts. Can we solve them?
The industrial problems in the world increase year after year. The same obviously is true
with the economy of all states of the world. The indebtedness (more or less) of all states
increases from year to year. All attempts to solve this problem have had no actual positive
effects or results. The results of the work of the World Bank and the IWF are not very con
vincing, although both institution do the best they can. But do they use the right tools? Do
they have the right tools?
The worldwide unemployment increases from year to year with extreme burdens on states
und industry. The poverty in the world increases to an extent that nobody can foresee the
consequences neither politically nor economically. The UN warns year after year not only
of these problems. But they will become serious, very serious and by all probability dan
gerous.
More and more companies, large ones as well as small ones or even very small ones, ran
into increasing financial problems during the last decades. Armies of consultants mobilize
all their power to solve the increasing problems. Turnover and profit in this business in
creases almost to the same extent as the problems increase, still.
There is no sign on the horizon that somewhere someone found a solution to stop the nega
tive development we all observe. The helplessness of the politicians is almost normality
and nobody is astonished about it anymore. The professional competence of our govern
ments is not convincing, it looks as if it has never been. Obviously we are not able to
change the direction of the present negative development into a positive one. A curing of
symptoms seems to be the present ultima ratio. Our known instruments seem not to be able
to change the direction of the development of our worldwide problems. Even the modern
10
systems of computer science could not avoid this development if one neglects temporary
successes, which were followed by further catastrophic developments.
The question therefore is: Are there possibilities at all to solve the economic problems of
corporations or states or (last but not least) the problems of the world economy? Many ob
servations point into the direction that the critical development of the world economy has
an exponential trend. This all points in the direction of a proportional correlation between
the economical problems of the world and the increase of the world population in connec
tion with the exponential increase of the usage of our non regenerative resources. This
trend is enforced by the desire of man not only to keep the present standard of living but
also to increase it further and further even by using state subsidies insisted upon. One gets
the impression that many people, unions, politicians, i.e. all of us, have lost the sense of
proportion. The socalled shifting of income from high to low is not the tool for a solution;
it’s another (wrong) medicine to cure symptoms.
A basic problem in this connection is the fact that men are by nature not able to realize the
exponential character of the mentioned development. This is due to the WeberFechner
Law, also called the basic psychophysical law, that says that human beings are not able to
realize mentally an exponential development as such, i.e. developments which are only to
be realized by mathematics. It is therefore very difficult to make a broad mass of men to
understand what is going on and to convince them of what to do about it. This law fur
thermore is a reason for wrong planning and wrong decisions if cases of exponential facts
are involved.
By all this we have to ask the question: Is it possible to stop the present negative develop
ment of the world economy at least to a certain extent? Should this be the case then the
only question remains: Do we have a chance and the tools to slow down the present devel
opment to a degree just to give the further increasing population of our planet a chance to
extend the 10.000 years of our cultural history for at least some few thousand years?
Starting from this point in this study we ask the question whether there are known natural
laws that could be of help to solve the above mentioned problems. For this we have to look
for laws that could be of help on the basis of their principal contents and to be valid for the
complicate conditions in the industrial world, the world economics, the financial economy,
etc. This means looking for laws that could be of some help for diagnosing economical
problems as well as to deliver tools for planning and executing economical procedures. If
there were such natural laws they would possibly even show us where we infringe against
such laws.
There are laws in the natural sciences that are generally valid in physics, chemistry, biol
ogy and technology as well as in all things we can think of, probably including the events
in the universe. Nobody would have any doubt anymore that this is true. Here we think es
pecially of the basic laws of thermodynamics, the first and the second law, known as the
Law of Energy Conservation and the Law of Entropy of Irreversible Processes.
The thermodynamics is the science of energy in all processes of physics, chemistry and so
on. Because there are no known processes in nature which do not obey both the laws of
thermodynamics regardless if these processes occur in open or closed systems it is only
natural to try to find out if these laws may be applicable to economic processes; qualita
tively as well as quantitatively. A further basis for this attempt is the fact that everything
that occurs in our world, and this includes all processes in the economy, depends on a sup
11
ply of energy regardless in what form. Independent of looking at a small retail shop, a large
corporation, the national economy or the world economy, nothing works without the input
of energy.
Because this is so it must be possible to explain every process in economy in energetic
quantities, inclusive the transfer of information as a part of economical procedures. The
energy consumption of a production company is included in the prime costs as well as the
BSP contains all costs of the energy consumption of a state. On the basis of known statisti
cal data it is easily possible to determine the amount of energy used per unit of prime cost
of a product or per working hour or per unit of the BSP of a state.
The following is just an example: In the processing branch of the German industry there
were about 6,84 million people working in 1987. The turnover of this branch amounted to
0,74 x 10
12
€. The energy consumption was totally 2160 PetaJoule. On the basis of 1650
working hours per worker and year we arrive per working hour at a turnover of about 65, 
€ and an energy consumption of about 190 MegaJoule per hour. If we validate these val
ues in the new century and the new currency of euro (€) or even dollar ($) it comes out that
one euro or one dollar corresponds roughly to about 0,8 kWh. At this point it does not
seem to be necessary to make a more elaborate calculation, the point to show here is that
there is proportionality between energy and money in economy. For the production of a
machine with prime cost of 100.000,  $ the energy equivalent is about 80.000 kWh = 2,9
x 10
11
Joule of used energy for the production of this machine. If one is looking for very
exact figures of the proportionality of money and energy one just has to consult the figures
of the respective statistical offices of a state.
The obvious fact that all economic operations are energetic operations or can be reduced to
such operations or processes must have the consequence that the laws of thermodynamic,
i.e. the first and the second law, have to be valid for economical processes. We therefore
call these processes ecodynamical processes from ECOnomy and ThermoDYNAMIC. But
if that is so, we can postulate already at this point that in economy generally each form of
energy is proportional to the corresponding monetary values. Therefore even if we use in
this study most of the time the term energy it is in most cases tantamount to the term
money. The laws of thermodynamic must have fundamentally the same importance in
economy as in physics, chemistry, biology etc. Already about 30 years ago N. Georgescu
Roegen pointed out the importance of the second law of thermodynamics in very elaborate
epistemological methods. As it seems to be with not very great success with his fellow
economists. Well, he personally had the advantage of a basic study in physics.
It shows that in the ecodynamics the general and the mathematical definitions differ
somewhat from those in the science of thermodynamics and the technical thermodynamics.
The reasons become clear easily. The general law of gases that plays a fundamental role in
thermodynamics and the thermodynamic temperature of an equivalent importance in ther
modynamics don’t mean anything in economics. The thermodynamic temperature of a
bank or the volume work of a department of revenue or the specific heat of a production
factory, just to name only three classical thermodynamical terms make no sense in ecody
namics at all. But on the other hand we will see in this study that the formal derivations
and laws of thermodynamics can be transferred without any restrictions into the ecodynam
ics.
Starting with this general thinking we develop in this study an economical foundation on
the basis of the laws of thermodynamic as formulated in an economical sense. To do this
12
we use the classical phenomenological description of thermodynamics as well as the re
sults and derivations of the statistical physics and quantum theory when treating the eco
dynamic quantitatively. We will not present a formal quantitative reasoning of the laws of
physics, as this is not necessary for the understanding of ecodynamic relations. These laws
are given and proved elsewhere so the reader is not depending on looking up special litera
ture of physics. As my teacher in thermodynamics, Prof. W. Oelsen, said at such occa
sions: “Sometimes you have to believe something to step forward”.
We shall present a very thorough concept that the thermodynamic temperature has no
meaning in ecodynamics and is to be replaced by a constant  which we arrive mathemati
cally almost the same way as the thermodynamical temperature is arrived at. The reason
for this being the obvious fact that anthropomorphic systems must have almost a constant
temperature as explained later in detail. Furthermore we will show that the “bit” of the in
formation theory has a very defined energy and that therefore there is a direct link between
the information theory and ecodynamics.
Similar to the fact that people do not, or cannot, realize the true effect of exponential de
velopments according to the WeberFechnerLaw, the working people in general probably
don’t realize the strong energetic dependencies within economic systems because it is
rather difficult realizing the meaning of the entropy in this connection. This probably is
one of the reasons for the permanent demand to increase the quality of life with the result
of a permanently growing economy by neglecting the faster and faster increase of entropy.
The unequal distribution of the growth of the population in lessdeveloped countries as
compared with the industrialized (wealthy) countries has the consequence of an increasing
gap between these countries. As long as the wealthy industrial countries set their main goal
in the increase of their economy for the fortune of their people, the economic problematic
on earth will not only remain but will increase and this probably with increasing speed.
This acting of the wealthy countries is not only one of the main reasons of world unem
ployment but will also become increasingly a political problem of intolerance and viola
tion. The increasing difference in social levels through the selfish economic behavior of the
(over) developed countries as compared with the poor and hungry lessdeveloped countries
and increasing (overflowing) population must finally lead to an explosion. One of the cen
tral quantities of this development is the increasing entropy. It may sound rather exagger
ated but if one defines increasing entropy as increasing chaos the result will be religious,
economical and moral intolerance.
The central quantity of the development of economical processes is according to the sec
ond law of thermodynamic the entropy. This question will be treated later rather thor
oughly. But at this point we will give a first definition of this difficult to grasp quantity.
On April 24, 1865 R. J. E. Clausius used this expression for the first time in his original
presentation of the Second Law of Thermodynamics before the Zürich Natural Research
Society. Clausius had looked for an expression coming as close as possible to the word en
ergy. He derived the word entropy from the Greek tµotq = change, turn around;
cvtµotio = turn inside and cvtµotciv = to change, to alter. These translations do not ex
plain too much if one does not connect it directly with the word energy. Entropy means in
this connection the change of useful energy in some other form where it cannot be used
anymore. This somewhat free interpretation comes as close to the later quantitative
13
mathematical derivation as possible. Another general definition of the entropy says that the
entropy is a measure of the disorder of a system. Both these qualitative definitions seem to
have no relation to each other. This shows the difficulty to understand what entropy really
is. Here we suggest staying for the time being with the broader energy explanation.
We will see in detail that in economic processes usable energy changes principally into an
other form of energy which cannot be used for work anymore, with the result of an simul
taneous increase of the entropy of the said system. Each production of a good by man re
sults in an increase of entropy of the system we live in. The original reason was the neces
sity for human beings to do something to stay alive, to supply the four basic needs for life:
food, clothing, shelter and fire. These processes create a rather small but necessary amount
of entropy. The negative point we have now to stress is the increase of entropy through
processes to fulfill the desire of men for wishes which have nothing to do with the mainte
nance of life – they are strictly luxurious. These increases of entropy exceed the necessary
minimum increase in an exorbitant way. The screw of increase of wages/salaries · in
crease of prices represents a further entropic process, the one of the entropy of money.
These are just some examples of the application of thinking in terms of the second law of
ecodynamics, as we should point out already at this place.
We mentioned N. GeorgescuRoegen (1906 – 1994) already, a known and worldwide re
spected economic scientist who has worked very thoroughly on the epistemological ques
tion of entropy. In his books “Analytical Economics” (1967) and “Energy and Economic
Myths” (1976) he treats the importance of the entropy in a general way also questioning
some of the ways of what we are doing. For instance he is very critical of questions of re
cycling by saying, that in many cases the recycling process does not pay off the used en
ergy, i.e. the result is still an increase of entropy and an uneconomical decrease of useful
energy. Looking at the foregoing paragraph there remains the epistemological question if
man is actually willing to reduce his increasing demand of luxury to give future generation
a chance for living some other thousand years.
With this remark we come back to the problem of understanding entropy. Thermodynamic
is taught at all scientific universities and technical universities. But fact is that thermody
namics is a rather difficult subject. Everyone who can afford it, circles around this field
during his studies as far away and as long as possible. This applies especially to the second
law and the questions of entropy. This may be the reason why the author so far to the best
of his knowledge has not found a quantitative treatment of the first and second law of
thermodynamics for economic questions.
The scientific buildings of the science of economy and the science of thermodynamic seem
to be very far apart from each other. On the other hand the present study shows that ther
modynamic und the dynamic of economy are very closely linked together. Georgescu
Roegen already said that „…the relationship between the economic process and the en
tropy law is only an aspect of a more general fact, namely, that this law is the basis of the
economy of life at all levels.” Or: “By improving and broadening our understanding of the
economic process it (the entropy law) may teach to anyone willing to listen what aims are
better for the economy of mankind” and “there can be no doubt about it: any use of natural
resources for the satisfaction of nonvital needs means a smaller quantity of life in the fu
ture”. He further said, “Clausius may very well be hailed as the first econometrician”. I
think he is right.
14
As it looks the thermodynamic laws describe all technical, chemical, biological and physi
cal processes of this world with respect to their energy behavior and their direction of
processes. These laws describe the economic processes of this world as well with respect
to their energy behavior and their direction of process. This means that economy can be
looked at as a special part of thermodynamics as GeorgescuRoegen puts it.
Einstein once said about thermodynamics and its laws:
"Thermodynamic is the only physical theory of general contents of which I am
convinced of that it will never be changed with respect to the appliance of the basic
fundamental concept – this for the special observance of the principal skeptics.”
Arthur Eddington, one of our most famous astronomers stated:
“If your theory is found to be against the second law of thermodynamics, I give you
no hope, there is nothing for it but to collaps in deepest huminilizatíon.”
In this study we deal in the first chapters with some basic definitions and then thoroughly
with the application of the first and second law of thermodynamics on economic processes
within and between economic systems. In the following chapters we treat the Free Energy
and the process of merger. For this we need an extension of the thermodynamic basics
treated before. It is unavoidable to demand something of the reader who is confronted with
these ecodynamical questions. But it is strongly attempted to describe the results and con
clusions in a way as easily to understand as possible.
Generally it is our aim to develop on the basic thermodynamics some correlations and
some laws for use in ecodynamics. The non linear thermodynamic developed in the last
decades and the thermodynamic that deals with questions far off the equilibrium will not
be applied or discussed here. We will see that the development and the application of the
basic ecodynamic questions are difficult enough, so why to complicate them with other
new theories. On the other hand the used basic thermodynamics in this study is the unques
tionable foundation for any further ecodynamic questions. This we will leave for the fu
ture. With the here offered presentation it is hoped to open the possibility for helping to
solve economic problems using the knowledge and experience of the classical economy
with the help of ecodynamic thinking.
The author likes to make a very serious and distinct remark at this point. This study is by
no means and absolutely not even an attempt to a philosopher’s stone! This study is the
desperate attempt to be of some little help for the human beings to survive. The author is
saying this as his wife and he have five married children and further descendants who all
look to the future and so he hopes that the readers will understand his concern.
15
2. General Remarks
Before we start to go into the details of the laws of the ecodynamics applying the laws of
thermodynamics we have to define some terms in connection with the economic systems.
This is necessary as we are using thermodynamic terms for economic questions and vice
versa. We will not leave the basics of thermodynamics but we have to build, lets say, a
bridge to the economy in the form ecodynamics.
2.1 Systems of Ecodynamic
As economic systems we may consider for instance large corporations, production compa
nies, retail shops, service companies like hospitals, departments of revenue, insurance
companies, etc. But states or countries are important and decisive economic systems, too.
In the last consequence, every household and every final consumer must be looked at as an
economic system.
The global economic system, the global system where all people of this world live in, has
to be considered as an economic system consisting of n
i
subsystems as for instance the
states on earth or defined areas where people live in, like the Eskimos. The location or the
arrangement of the boundaries of economic systems depend only on the question to be
solved as for instance if one is looking for the production of a specific factory or the ex
change of goods between economic systems or the question of the merger of two compa
nies.
An economic system as such is enclosed by system boundaries, which separate this system
from other economic systems. The location or the arrangement of these boundaries de
pends only on the questions asked and to be solved. Therefore, one has to define the
thought boundaries generally according to the problem. This we will also do when treating
the laws of thermo and ecodynamic in the later chapters.
Studying economic systems, we are mainly interested in solving one or all the three ques
tions:
 What is happening within an economical system?
 What is the balance of energy of the transport of physical or nonphysical energy
crossing the boundaries of the economic system or systems
 What happens when two (or more) economic system merge?
To solve these questions we are looking at the economic systems to investigate to be in a
state of equilibrium. Then we will take differential changes in form of differential input or
output of physical or nonphysical energy. For instance, these energies can be production
material or wages respectively. (See chapter 2.2) These socalled quasistatic changes tell
us what is going on within an economic system by these very small steps.
In case of the question of a merger, we have to develop additional relations we do not need
for both the other questions. These laws of an ecodynamic of binary systems will be treated
in Chapter 5.
16
The basic properties of an economic system we learn in this study are valid in general and
independent of the properties of the system boundaries which we still have to define or the
types of energy crossing these boundaries or the state function of economic systems.
The state of an economic system at a certain time is principally independent of the way in
which the system has reached this state. This law of independence is very important and
always to remember although an economic system can reach a certain state by many ways.
This means too, that the state of an economic system is always independent of its history.
The boundaries of a system as such never influence any formula or calculation. The system
boundaries are mathematical surfaces but no separate systems. The thickness of these
boundaries is mathematically zero. Analytically decisive however is the allocation of the
boundaries with respect to the treated economic systems and the type of energies, which
can pass these boundaries.
In this study we distinguish between three different basic types of economic systems in
combination with properties of coordinated system boundaries:
 Open Economic Systems
With open economic systems all types of energy, physical as well as nonphysical,
can cross the system boundaries in any direction.
 Closed (adiabatic) Economic Systems
(adiabatic: Greek, no transition)
For these economic systems, physical energy is principally not permitted to cross
the system boundaries. On the other hand, the transition of nonphysical energy like
wages and salaries is possible.
 Isolated Economic Systems
For isolated economic systems, neither the transition of physical nor nonphysical
energy is permitted. The system boundaries are impermeable to any energy transfer
and this includes informations. Isolated economic systems can only develop inter
nal balancing processes.
If not mentioned otherwise we are principally using only differential quantities for the
transfer of system boundaries. This type of treatment has no negative influence on the va
lidity of the developed laws and guarantees mathematical transparency. This type of treat
ment is generally used in thermodynamics.
We have already mentioned that system boundaries can be changed with respect to their al
location. This means for instance that the base of an economical system may be variable.
In such a case, we have to consider whether this is a fictive variation or an effective
enlargement or reduction in size of an economic system. In this case, we would have to
consider an energetic change of the economic system as for instance an increase or a de
crease in company capital.
For this thought, we will look at a simple example: A company owns an adjacent arable
land, which is not fenced in within the company. To add this arable land through a fictive
17
or even effective moving of the fence just changes the fenced in area of the company but
not the contained energy of the company as long as the arable land is balanced in the bal
ance sheet of the company. But if the company has to acquire this land in the first place
then the company will be weakened, as it has to spend money for the purchase. As we will
see later this means a decrease of the inner energy of this company (Investment in “Size”!).
Looking at open economic systems we observe normally that the system boundaries are
crossed by a flow of physical or nonphysical energy in both directions, in and out the eco
nomic system. To treat these movements of goods we can use without restriction differen
tial quantities, as we will see.
For the treatment of large and/or complex economic systems, it is advisable to define so
called “control rooms” which may contain as many single economic systems as necessary.
By this way, it is then easy to investigate the exchange of energy between two economic
systems without the influence of other adjacent systems. In case of an investigation of the
merger of two economic systems, we put both systems in a separate control room with a
further system boundary between both of them. By removing the thought boundary we can
evaluate what influence the merger has on either one of both the companies. After this, one
may remove the boundaries of the control room to look for the influence of the merger on
the outside.
Generally, we look at economical systems in an ecodynamical way as a business system
with the accompanying balance sheets and profit and loss accounts. According to the vari
ous different questions on may bring up, the system boundaries may be placed in the most
convenient way.
There are many ways to classify economic systems and their interrelations with one an
other or with the surrounding system of nature. What we want to say is that the possibili
ties of the chosen structure of economic systems is practically unlimited and dependent
solely on the questions asked or to be solved.
18
2. General Remarks
2.2 Energy Types in Ecodynamic
Now we have to define the quantities and the modes of energy we observe in economic
systems. It is evident that we cannot use thermodynamic quantities like the thermodynamic
temperature, the specific heat, and transfer of heat or volume work in ecodynamics or in
economic questions in general. The temperature of a production company or the specific
heat of a bank does not make any sense. A special problem presents the term or quantity of
temperature. In thermodynamics, this is probably the central quality at all. We will see,
while treating the question of the second law of thermodynamics for the evaluation in eco
dynamics that we will arrive at a constant quantity  instead of the quantity temperature.
We start here with the definition of the energy quantities, as we will use them generally in
the ecodynamic. Energy quantities, which we apply later in connection with the question of
merger, will be introduced with the treatment of the ecodynamic of binary economic sys
tems.
In the introduction, we have said already that monetary values and energy values are
equivalent in ecodynamics. Every good for which we have to pay money needed for its
production energy. Aluminium for instance is produced from the mineral bauxite with the
help of electrical currant. In rolling mills driven by electrical currant aluminium sheets are
rolled after heating to rolling temperature in electrical heated furnaces. On hydraulic
presses powered with electricity, we manufacture pots and pans. The deeper we look into
the details of economic processes one discovers that energy is used everywhere, that noth
ing goes without the application of energy in what form whatsoever. Even men have to eat
which means nothing else but to supply our bodies with energy just to stay alive and be
able to do mental work as well as manual work to produce goods or general services we
need for life or we like to have.
For the ecodynamic, we consider it as a general condition:
 Money and energy are proportional to each other.
Theoretically, we could even print bank notes with Joule values instead of Dollars or Euro
signs. These notes would have a constant value. In this study, we use instead of money
values energy quantities, as this is the basis of all of our thinking here. We use terms like
’Inner Energy’, ‘Entropy’, ‘Exergy’ or ‘Anergy’ etc. because we define that these quanti
ties have in ecodynamics exactly the same meaning as in thermodynamics. The exact
meaning of these and other quantities will be worked out in detail in the next chapters.
In ecodynamics, we have to distinguish between three different types of energy:
1. Energy that enters the economic processes in form of material or with the help
of materials
2. Energy that is brought into the ecodynamic processes by the working man to
create a good or a service,
19
3. Energy which is necessary in form of capital to make economical processes
possible like for instance by investing machinery.
Details to 1:
This energy we call generally physical energy with the notation Q or q. Under this term,
we summarize all forms of energy, which is or was in some form material. These are ores,
metallic or nonmetallic or organic raw materials, finished products from a nail to an air
plane, from a cupper wire to a computer or pharmaceutic products. Electrical currant is a
physical energy too; its origin starts with oil or coal etc. As physical energy we define also
services as results of engineering, services of insurance companies if for instance the fi
nally result is the purchase of a physical good. Q and q also represent machines, which
leave a manufacturing enterprise or enter the factory of a buyer.
We can write this in form of an equation
Q ÷ E Q
j
= E n
i
q
i
(2.1)
where n
i
gives the number of the specific physical quantities q
i
, which flow into the prod
uct Q.
Details to 2:
To produce or to manufacture semi finished products Q
i
or q
i
or finished products Q
x
or q
x
it is necessary to use physical energy in form of raw material and non physical energy W
or w in form of wages or salaries to initiate the work of man to produce a pan of a peace of
aluminium sheet. These are money values the workers in an economic system receive as
“energy” incentive to do something. Later we will see that this is the “Value Added”.
We can write
W ÷ E W
i
= E n
j
w
j
(2.2)
Where n
j
is for instance the number of workers involved in an economic system.
Details to 3:
Decisive for the inner value of an economic system is the capital flow in or out of the sys
tem.
This capital C or c is a measure of the size of an economic system but not of its effective
efficiency or production capacity. The capital C or c represents the capital equipment
(capitalization) of an economic system for the investment in machinery, buildings, etc.
Further, we list here nonproductive materials used in the production or the administration
etc. For this a basic example: production equipment leaves a manufacturer as the energy
equivalent – Q and is acquired by another economic system as investment to produce
something else. The buyer has to spend the capital +C on this equipment whereby he in
creases the value of his economic system. We can write:
C ÷ E C
i
= E n
j
c
j
(2.3)
Where n
j
is the number of the capital flows c
j
, which can be plus or minus.
Money values crossing the system boundaries into the system without being used directly
represent latent energy. This latent energy can be transferred in physical material q or non
20
physical energy w or c to be used for investments. As long as there is no effect, these
money values are suspense items on a suspense account. If they are designated for a spe
cific purpose, and one likes to list them, one could do it for instance with q’, w’ or c’. We
will not consider values of this kind here anymore, as they do not have any influence on
our basic question. This does not mean one could skip them in practice.
Generally, there will be probably no decisive problems to define the energy quantities or
the corresponding/proportional money values. If one is in doubt one has to make a careful
analysis of balance sheets and profit and loss accounts to determine what form of energy
has to be considered.
Like in thermodynamics, we have to distinguish very carefully between extensive quanti
ties Q, W or C and intensive quantities q, w or c as we said already. Extensive quantities
are dependent on the size of on economic system while intensive quantities are entirely in
dependent of the size of an economic system. We will come back to the point in detail in
the next chapter.
Because we deal basically with quasistatic functions, we are permitted to use differential
variations only. We must write therefore:
Q= E n
j
dq
j
W = E n
j
dw
j
(2.4)
C = E n
j
dc
j
Looking at these differential equations it becomes obvious that the intensive quantities are
the decisive ones in ecodynamics, because only on this basis it is possible to develop basic
mass independent equations.
In order to simplify our treatment we shall normally do not pay attention to losses like
scrap or waste. In the basic equation, only additional figures would have to be added with
out a change of the basic meaning of such equations. Detailed analyses naturally require a
consideration of such values.
21
2. General Remarks
2.3 State Functions in Ecodynamic
Operations or processes in ecodynamic as well as thermodynamic systems with defined
system boundaries are described by quantities, which clearly define the status or the state
of the system. These quantities are generally called state functions. State functions must
have certain characteristics and have to obey certain mathematical laws. In the following
we will lay out the necessary first basics for state functions in ecodynamics.
The State Functions Q, q the physical energy, W, w the nonphysical energy and the capital
as energy C, c, which can cross the system boundaries, describe the economic systems in
ecodynamic. The forth state function of an economical system is the inner energy U, u.
This inner energy gives information about the production capacity of such a system as for
instance in form of the capital (money/energy) invested in production equipment. The
difference of U
2
– U
1
therefore is the change of inner energy of an economic system. The
difference A U
21
may be larger or smaller than zero. We will learn more about the most
important state function S, s when we come to the description of the second law of ther
modynamics.
Again we have to distinguish carefully between extensive and intensive quantities. The ex
tensive state function X of an economic system represents the sum of the extensive state
functions X
i
of the parts of the system or of subsystems according to
X = E X
i
(2.5)
Extensive State Function is written principally in capital letters, as U, Q. W, C, and S.
As we have seen already intensive state functions are independent of the size of an eco
nomic system therefore they do not have additional properties. The temperature is an easily
to understand example. A large room divided into small rooms with walls not permeable
for temperature where all small rooms will have the same temperature will not change this
temperature when all walls are removed. If we look for the volume, however the total vol
ume of the large room is the sum of all small ones.
It is now possible to reduce extensive quantities like U, Q, W or S to intensive quantities.
With this, we have the possibility to formulate general laws. If we divide extensive quanti
ties by the corresponding base unit, we obtain the intensive value of this intensive state
function according to
x =
n
X
(2.6)
where n is the number of parts which represent X. Principally we can say that all intensive
state functions are the reduction of the corresponding extensive quantity to the base quan
tity. The quotient of two extensive quantities is always an intensive quantity. Specific
quantities are intensive quantities too.
22
Intensive state functions are written here always with small letters like q, w, c, u, and s.
With few exceptions like in chapter 5.4, we use in this study only intensive state functions.
On this basis, we obtain unmistakable mathematical correlations.
Every change in the state of an economical system has as a consequence a change of one or
more state functions. This means that every change of an economical system interferes
with the system, which results in a disturbance of the state of equilibrium. To treat such
disturbances is rather difficult if one does not apply the technique of differential steps. We
look at processes in or between economic systems as very slow processes where we take it
as given that the processes move in differential steps from one state of equilibrium to the
next state of equilibrium. This means that we consider each change of state as a quasistatic
event. This is the usual way of the mathematical treatment of thermodynamical problems.
We do so as if the economic systems follow up a sequence of states of equilibrium. The re
sults or laws obtained in this way can be transferred fully to all economic systems in eco
dynamics.
We mentioned already that state functions have certain properties. To enable us to treat
economic systems mathematically sensible without too great difficulties we say that eco
nomic systems are homogeneous. This assumption is possible because economic systems
generally consist of a very large amount of parts. Using a macroscopic analysis in ecody
namics as it is done in thermodynamics, then we can say that the sum of all microscopic
subsystems in an economic system can be treated as a homogeneous system. In case we
looked at an economic system as heterogeneous we would have to apply for each state
function for each heterogeneous part of the system separate equations. Taking into account
that the number of heterogeneous parts in an economic system can reach a magnitude of
>>10
10
it is obvious that a mathematical treatment on this basis is almost impossible. Fur
thermore we will experience that using such a way will not give us additional knowledge
or insight of what is going on. An observer outside of an economic system sees this system
anyway as a homogeneous unit. Microscopic details are of no interest to him as he is inter
ested in what goes on in general i.e. the result of an input or an output of the system.
In an elementary homogeneous economic system we can describe the specific state of the
system well defined with two independent state functions
u = u (q, w) (2.7)
This means the state function u is a function of q and w, which are measurable state func
tions too. On the basis that the state function u is steady differentiable we obtain for the
differential of the dependent intensive quantity du
dw
w
u
dq
q
u
du
q
w

.

\

o
o
+


.

\

o
o
= (2.8)
du = x dq + y dw (2.9)
where the coefficients x and y can be constants as well as functions of the state variable.
For each state variable du is mathematically a total (complete) differential for which the
law of Schwarz applies
w
q
q
y
w
x


.

\

o
o
=

.

\

o
o
(2.10)
23
as well as the condition
0 du =
}
(2.11)
i.e. after the system comes back to the initial state, the state function does not differ from
that at the starting point.
We have further to consider the following correlation between the partial differentials
f (u, q, w) = 0 (2.12)
u = u (q, w) q = q (u, w) w = w ( u, q ) (2.7a)
1
u
w
w
q
q
u
q u
w
÷ =

.

\

o
o

.

\

o
o


.

\

o
o
(2.13)
We will come back to this mathematical interrelationship later on.
Based on what we have said so far we are now in the position to start with the actual treat
ment of the laws of ecodynamics.
24
3. The Laws of Thermo and Ecodynamic
3.1 The Zeroth Law
More than hundred years ago Maxwell pointed out that the relation between three thermo
dynamic systems might have the importance of a physical law. Only 1931 R.H. Fowler
discovered the importance of this relation mentioned by Maxwell. At this time the first and
second law of thermodynamics were very well established and accepted. Therefore this
new law was named the Zeroth Law. What does it say?
Generally we observe in nature that physical systems left by themselves are tending to
move toward a state of equilibrium. Therefore we have to ask what happens to economic
systems, which are in equilibrium with each other?
A closed economic system is in a state of equilibrium if no measurable changes can occur
within the system. With this statement we postulate the state of equilibrium of said system.
Formally this postulate applies only to this system, which is in a state of equilibrium in it
self. But what is if different economic systems are in equilibrium among each other? If we
apply the equilibrium postulate we must then say that there are no measurable ecodynamic
changes possible between these economic systems. Since we said already that we could re
duce all economic processes to energetic processes we now conclude:
 Two economic systems, which are in equilibrium each with a third economic sys
tem, are also in a state of an energetic equilibrium among each other.
If: A · C · B
then: A · B
This is the socalled ‘Zeroth Law’ of thermodynamics and therefore of ecodynamics, too.
The law looks rather simple, but one has to keep it in mind if one deals with many systems
to find out which if these system are in equilibrium with each other or not.
25
3.2 The First Law of Ecodynamics
3.2.1 Exergy und Anergy in Ecodynamic Systems
Since its origin thermodynamics counts as one of the more difficult fields in natural sci
ence. The reason for this is not only the necessary mathematical approach but also espe
cially the problem to give a vivid description of the thermodynamic problems and their
correlations. Basis for this is to understand what is usable energy and what is not anymore
usable energy and in this connection the description of what is entropy. How can we de
scribe entropy, not by a mathematical formula but in a way of a vivid understanding?
It took almost 60 years after the publication of Max Planck’s famous textbook on Thermo
dynamics that in the 40
th
of the last century researchers looked closer to what heat energy
really was. In this connection Z. Rant created during the decade1950 / 1960 the definitions
for exergy and anergy for the application in thermodynamic thinking in the technological
application of thermodynamics. Although the mathematical treatment of the term exergy
and anergy is difficult in technical thermodynamics it turns out that it is rather simple in
ecodynamics. The concept of exergy and anergy makes it easy to interpret difficult correla
tions. Also the first and second law of ecodynamic can be formulated for a more easy
understanding.
The first law of thermodynamics says that there is no creation or annihilation of energy but
only energy transformation. The first law does not say anything about the direction of en
ergy transformation. This will be done by the second law of thermodynamics, which says
also that there are restrictions between the transfer of energy from one form into another
form. We may mention already here that work as energy can always be transferred in inner
energy of an economic system but inner energy cannot be transferred in energy of work.
Using the terms exergy and anergy this correlations become more easily to understand.
Therefore we define as follows:
Exergy:
 Exergy is the form of energy that can be transferred without any restriction into any
other form of energy. Thermodynamically and ecodynamically exergy we define as
all forms of mechanical and electrical energy, in ecodynamics we have additionally
the nonphysical form of energy which we designate with the letters w or c.
Anergy:
 Anergy is the form of energy that cannot be transferred in any other form of energy.
The energy in our environment is strictly anergy that we cannot use as an energy
source. The same is true for the inner energy of the isothermal ecodynamic proc
esses.
It is very important to remember always that energy in form of heat in our environment
cannot be transferred into an energy form we may use. For this we shall look at an example
of daily life:
26
We like to prepare us a little can of tea. Therefore we bring the necessary amount of water
to the boiling point and brew up our tea. For doing this we need electrical current deliv
ered as energy from the electrical power station. This current we use as Exergy. The hot tea
cools slowly down delivering his heat as energy to the surrounding environment. A very
small amount of the original exergy input is used for the extracting the caffeine and the
ethereal oils from the leaves of the tea (solution energy). During the threeminute brewing
time of the tea we get the telephone call of a very good old friend we have not talked to
since months. He reports on the beautiful sailing in the Aegis, the wonderful weather and
the romantic dining in the small fisher villages. The tea stands there, forgotten, cooling
down giving his heat to the environment, naturally heating it up, but only may be by one
billionth of °C. Finally the tea has the same temperature as our room. With the exception of
the solution energy all exergy has been transferred to anergy in the environment. This
process is called dissipation of heat. This dissipated energy, we call it here anergy, is lost
for us forever, as well as the exergetic solution energy. The total result of this rather simple
process is a loss of energy, which we cannot reverse. At this point we may remark that we
have also increased the socalled Entropy of our world.
The reader may think of other examples more serious than just brewing tea where exergy is
transferred into anergy without any use or only a small one. For instance any power station
using fossil fuels transfers about 60 % of the used exergy just for heating up the environ
ment and therefore changing this exergy into anergy. Only about 40 % will be used for
making current (= exergy). How much of this exergy is really used finally as efficient ex
ergetic energy probably nobody can answer. Certainly it is not very much as seen by our
tea example.
The transfer of useful energy = exergy in not any more usable energy = anergy cannot be
reversed, this transfer is irreversible. Because all economic processes regardless of what
type they are, always need energy for their initiation and process and it is very important to
realize that this energy is always exergy, which will become always unusable anergy. This
we have to remember every time when analyzing economic processes.
27
3.2 The First Law of Ecodynamics
3.2.2 General Treatment of the First Law
The first law of thermodynamics is also known as the principle of conservation of energy.
This principle is one of the few basic laws in nature, which are valid in physics, chemistry,
biology, technology, etc. It is an a posteriori law, which we cannot proof mathematically.
But there is no hint at all that would put a question mark on the first law of thermodynam
ics. Because this is so, we say that the first law is also valid for ecodynamics i.e. that it
must be valid.
It was Max Planck (1858 – 1947) who gave us the first basic definition of the first law in
his famous book “Lectures on Thermodynamic”, Leipzig 1897:
 „It is impossible to build a „perpetuum mobile of 1. art” (perpetua mobilia of 1. de
gree) i.e. a periodically working machine which delivers working power or living
power at any time out of nothing.”
There are many other formulations of the first law of thermodynamics, which all describe
the principle of conservation of energy:
 No energy is lost during a transformation of energy.
 There is no machine, which can produce work without an energy supply.
 Etc.
On the basis of these different but equivalent definitions of the first law of thermodynamics
we can postulate various definitions of this first law in ecodynamics at the start of our de
tailed treatment:
 It is not possible to create an economic system that produces work at any time out
of nothing.
 An economic system surrounded by system boundaries, which operates only by it
self, cannot stay in existence.
 There will be no closed economic system that can supply goods and/or work of
any type beyond its system boundaries without an supply of energy in form of the
production factors capital, material and work crossing the system boundaries from
the outside to the inside of the system.
The first law applies inevitable for the whole global economic system, the world economy.
The apparent problem that the world economy should have always sufficient energy in
form of production factors as defined in business administration or macroeconomics can
not be cleared by the first law. For this we need the second law of thermodynamics, the en
tropy law that we shall treat later.
28
But on the basis of the definitions of exergy and anergy we are in a position to make some
general remarks for a better understanding of this problem already at this point. The total
energy of economic systems is always the sum of exergy and the anergy of these systems.
This is a result of the first law. Exergy can be used for any energy transfer while anergy is
useless to us although it is there. Useful production factors will be changed into anergy
during any process in an economical system. This fact is not reversible! Our world econ
omy is enclosed in a world economic system. That means that the seemingly indefinite
available energy resources of the world will be transferred by all of our doings irreversible
into anergy.
On this basis we can write the first law of ecodynamics as follows:
 For all economic processes we need energy in form of production factors whereby
usable energy in form of exergy is transferred into anergy and therefore irrevoca
ble withdrawn from use. The sum of exergy and anergy is always constant. A
transfer of anergy into exergy is impossible.
Based on another definition of the first law of thermodynamics by Max Planck we can de
fine for economic systems:
 The sum of all effects of the production factors in an economic system with a
given state as related to an arbitrary state of normality is equal to the sum of all ef
fects of these production factors which are produced outside of the economic sys
tem if the economic system transfers from the given state into the arbitrary state of
normality. The mode of this change is of no interest for this change of state.
All mentioned definitions of the first law of ecodynamics are entirely equivalent. They tell
us only the different points of views one can look at the law of energy conservation.
Lets have a more or less simple example of application of the first law of ecodynamics:
A company gets by some reason whatsoever into a state of overindebtedness. This means
ecodynamically that the flow of energy in form of capital out of the company was larger
than the flow of energy into the company in form of money. The “Inner Energy” of the
company, seen as liabilities on the balance sheet, differs in form of overindebtedness nega
tively from the normal state. In this case the company can be brought back to the normal
state according to the first law of ecodynamics only by a capital flow from the outside. By
what means this will be done is at this point an open question. Principally it is irrelevant if
the overindebtedness is repaired by inflow of money (capital energy) maintaining the same
size of the company or by a reduction of personnel but no change in turnover i.e. measures
of rationalization. In both cases the indebtedness is reduced by a flow of capital from the
outside. It is but impossible that the company can eliminate the overindebtedness without
outside effects. This would conflict with the first law of ecodynamics. It is a fact that so far
nobody succeeded to get himself out of a swamp by dragging himself out on his own hairs
(with the exception of the famous Baron von Münchhausen who also managed to get be
hind the enemy lines riding on a canon ball).
Looking at the indebtedness of the economic system of a state on the basis of the first law
of ecodynamics one arrives at analog conclusions. To speak in these cases of a real overin
debtedness is more or less impossible because by the authority and power of the govern
ment it is possible to change the money equivalents of the production factors or the inner
29
energy of a state just by dividing the amount of indebtedness through a freely chosen de
nominator. This without however considering the consequences most times too much. The
denominator as determined by authoritative power determines the reduction or even elimi
nation of the indebtedness of a state through a capital cut. Certainly a method not advisable
very much.
Instead of such a drastic currency reform a state may try to solve the problem of state debt
looking at the very many economic subsystems within his large economic state control
room. By combining the use of these subsystems, as for instance the subsystems “tax
payer”, the state may possibly succeed in reducing his debts especially if some of the sub
systems have reserves of inner energy, expressed in terms of money, which the state may
collect in form of new and/or additional taxes. But even this is rather dangerous because
the valuable inner energy of the people will be transferred more or less without thorough
effect into anergy. The state destroys the valuable inner energy of his subsystems by curing
the symptoms of his mismanagement but not curing the actual reasons for the indebted
ness. It can easily be seen that these methods of reconstruction the debts of a state is a dan
gerous approach. It is impossible to create a state without debts by this method. Taking
into account the lessons we will learn with the second law of ecodynamics it becomes clear
that these measures of a state will result in an irreversible increase of the entropy of the
economic system of the state and that means destroying valuable production factors with
out to much chance to gain them back. This method is not recommend. The world wide use
of it, in some way or another, may very well be one of the reasons for difficulties we ob
serve in the last decades.
On the basis of its authority a state could eliminate all his debts by a simple strike with a
fountain pen. But using this method of dividing through infinity the state uses the Münch
hausenMethod. This does not eliminate the reasons for the government failures.
The probably last method to solve the debt problem of a state would be the use of re
sources outside the economic boundaries of the state for instance by war or just occupa
tion. But these methods, although not uncommon in history, have their limits by
 The limits of the resources of our world
 The claims of other states on the same resources.
Although we did not treat the definitions of the first law quantitatively it should be clear by
the discussion so far that we could draw very important and farreaching conclusions gen
erally on the basis of this law. For the application of the first law of ecodynamics it is ir
relevant if we look at economic systems like companies or like states. The first law applies
to both of them with the same importance.
The examples discussed show that the indebtedness can only be overcome with external
help. Without this a company or a state cannot dispose of the debts. Indebtedness in eco
dynamical sense is irreversible. We have used the term “irreversible” already a few times
therefore it is necessary to define the terms reversible and irreversible as we use them in
ecodynamics. As a matter of fact there is no difference in the meaning of these expressions
in thermodynamics or ecodynamics.
 Reversible are economic processes that can flow in either direction forward as
well as backward, without any energy changes of the environment of the eco
30
nomic system in question. Reversible economic processes cannot be realized in
practice, they are only ideal changes of the state of an economic system.
 Irreversible are economic processes, which only can be reversed through addi
tional energetic changes of the environment of an economic system i.e. through
input of exergetic production factors. All macroscopic processes in nature and
therefore in the economy too, are irreversible.
At this point we deducted the fact of irreversibility by our experience. When we come to
the quantitative treatment of the Second Law of Ecodynamics we will learn that there are
no reversible processes possible in ecodynamics, all processes are irreversible.
According to the first law the inner energy u of an economical system is a function of the
state functions q, w, and c (chapter 3.2). These are intensive quantities, which describe the
state of a system unequivocally. We can write
u = u (q, w, c) (3.1)
If we define the inner energy of an economic system at a given state with u
2
and the normal
state with u
1
than we can write the first law in form of the equation
u
2
 u
1
= A u = A q
21
+ A w
21
+ A c
21
(3.2)
The term A q
21
represents the money equivalent of the physical energy crossing the system
boundaries, the term A w
21
is the value of the nonphysical energies crossing the system
boundaries, for instance the money for wages and salaries, and the quantity A c
21
defines
the energy crossing the system boundaries in form of capital for instance for investments to
change the inner energy from state 1 into state 2.
The equation (4.2.) is generally valid. For detail analysis it is naturally necessary to allo
cate the various energy (money) values according to the balance sheet and the profit and
loss account or the basic data for them.
Equation (4.2) says that the inner energy u of a system depends on the quantities of the en
ergies q, w and c crossing the system boundaries. With respect to the sign, + or , we define
that all energy flowing into an economic system will be plus (+) and all energies crossing
the system boundaries by leaving the economic system will be minus (). This is a conven
tion we should strictly maintain to avoid misinterpretations. The energy q
2
, which leaves
an economic system for instance as the final product of a production company as – q
2
may
cross the system boundary of a trading company as +q
i
.
One of the main consequences of the first law of ecodynamics is the fact that an economic
system cannot have any effect outside of its system boundaries without a change of the in
ner energy of the system. This with the condition that energy has to cross the system
boundaries increasing and/or decreasing the inner energy of the system. This is the conse
quence of the impossibility of a perpetua mobilia of 1.degree. But we should remind us
that this law gives us no hint with respect to the direction of a process. For this we need the
second law of ecodynamics.
31
Looking at the extreme large sum of all the economic systems on the world it follows that
the economic results and therefore the existence of this global economic system is only
possible on the cost of the system nature. Only the energy transfer from the system nature
into the global economic systems with its many subsystems, including the last consumer, is
the basis of our existence.
At this point we cannot make a definite statement on the consequences of the energy trans
fer from the “System Nature” into the “System Global Economy”. We do not know if the
inner energy u
i
of the global economic system remains constant or decreases or increases.
The same applies to the System Nature. These questions cannot be answered on the basis
of the first law only. But we can make some general remarks already at this point. For man
the system nature can be looked at as a large control room enclosing all anthropologic eco
nomic systems. Compared with the duration of life of these manmade systems the time
needed for the development of our resources like fossil fuels or ores is almost infinit or
cannot even be created once more at all because for the development of some elements we
need the explosions of super novae. The result is that the economic systems of men depend
on the resources of the system nature without replacing them but destroying them.
We have to consider other serious consequences: The exponential development of the
number of people living on earth and the exponential development of our technology both
asking for an exponentially increasing demand of the resources of the system nature with
the result of an exponential decrease of the recourses of the system nature which we need
as energy input for all our economic systems. According to the first law we may say that
the total energy balance will remain constant but we must take into account that this bal
ance is the sum of exergy and anergy with the inevitable fact of the transfer of exergy into
the unusable anergy. As we will see later this results in an increase of the key quantity En
tropy.
What we have said so far includes the question of incident energy radiation from the sun or
outer space. Physically we have an equilibrium between incoming radiation and outgoing
radiation, the Albedo. By all what we know presently this equilibrium is obviously dis
turbed by men but not to his advantage.
32
3.2. The First Law of Ecodynamic
3.2.3 Quantitative Treatment
The macro state of an economic system in the state of equilibrium can be characterized by
its constant inner energy. For a closed isolated system we obtain
U
isol
= E u
i
= const. (3.3)
The intensive quantity inner energy u of an economic system represents the energy of the
system given by the production factors. The inner energy u must be an unequivocal func
tion of the independent state functions of the economic system.
To bring an economic system from state A to state B it is necessary to supply the energy
Au
AB
in form of production factors. To bring the same economic system back from B to A
one has to apply production factors with the energy A u
BA,
Figure 1.
B
A u
AB
AA
A
Au
BA
Fig. 1
The economic system has then moved through a cycle process A ÷ B ÷ A. The values of
the inner energy Au
AB
and Au
BA
must be equal because otherwise we would have the
possibility to create energy out of nothing just by using ways of different energies. This
would be the solution for a perpetuum mobile which is impossible according to the first
law of thermodynamics and therefore ecodynamics, too. For this cycle process we can
write therefore:
}
= 0 du (3.4)
The integral
}
du
is called the integral over a complete differential.
According to the first law, the inner energy is a function of the state functions q, w and c as
we have already seen;
u = u (q, w, c) (3.1)
The quantities q, w and c are intensive quantities and state functions, which describe the
state of an economic system uniquely.
33
With this we arrive than for the general formulation of the First Law of Ecodynamics
du = oq + ow + oc (3.5)
Writing oq and ow as well as oc means that these quantities are no total differentials be
cause the integrals
}
oq ,
}
ow and
}
oc are normally depending on the way of integration.
In case of formula 4.1 we can also write
u = u(q, w) u = u(q, c) u = u(w, c) (3.6)
with the condition
1
c
w
c
q
w
q
q w c
÷ =

.

\

o
o

.

\

o
o

.

\

o
o
(3.7)
The state functions of an economic system must be unique. If an economic system moves
through a closed cycle all dependent as well as independent state variables must have after
finishing the cycle the same values as at the beginning i.e.:
du = 0 (3.8)
All economic systems must have stored a defined and measurable amount of inner energy
u. This inner energy u is a state function whereby it is without importance in what form
this energy is stored. Not the production factors as such are important but only the sum of
the factors. For a specific case, it is naturally decisive how the production factors relate to
each other to full fill certain production needs. But energetically counts the sum only.
In thermodynamics, the unit of the inner energy is defined in Joule according to the inter
national SIUnits. For economic systems, we can use the equivalent money values instead
of the production factors. In case one uses the corresponding/proportional money values
but needs for some reason the effective energy values one must use a conversion factor c
which says how much Joule correspond to the basic money value ‘1’. If q
M,
w
M
und c
M
are
the respective money values for q, w and c we obtain for the first law
du = c (oq
M
+ ow
M
+ oc
M
) (3.9)
Equation (3.9) clearly shows that the production factors in the economy are proportional to
the corresponding energy values. While the necessary energy of economic processes is
generally more or less constant, one has to consider that money values underlie influences
of the money market like inflation or deflation and others. This offers the possibility of
economic comparisons independent of the market value or the exchange rates of money.
In this study, we assume generally a conversion factor c = 1 [Joule / Money Unit] and we
will not use or write this factor anymore. In practise, it is without question necessary to de
termine the conversion factor. This is necessary especially if one wants to compare eco
nomic energy data of systems with different currencies.
As we have seen already, we can write the first law of an economic system with the basic
state u
1
and a given state u
2
as
34
u
2
– u
1
= Aq
21
+ Aw
21
+ Ac
21
(3.2)
The quantity Aq
21
represents the money equivalent of the physical energy q transported
across the system boundaries, Aw
21
is the corresponding value of nonphysical energies
and Ac
21
is the capital equivalent crossing the system boundaries.
For equation (3.2) we have made the assumption that the economic system under consid
eration is in the state of rest so we do not have to consider kinetic or potential energies. In
case we have to investigate a moving airplane it might be that we would have to take these
energies into account depending on the questions to be solved. This only as a side remark.
The state function c is an indicator of the size of an economic system or its change in size
respectively. In the classical thermodynamic we have to consider many times volume work
by which the inner energy becomes a new state function the socalled ‘Enthalpy’. In eco
nomic system however we do not have to consider this type of energy. Ecodynamically we
do not have volume dependencies or pressure dependencies that play a very important role
in thermodynamics. Most important however is the fact that we deal in ecodynamics only
with isothermal systems i.e. we don’t have to consider temperature dependencies as we
will show in detail when we are treating the second law of economics.
The state function c represents no volume work as it is a capital quantity like q and w. In
ecodynamics we treat c as capital flow in or out of an economic system with given system
boundaries. Therefore we have a direct connection to the inner energy of a given system.
In very many analyses of economic systems we have no change of capital, c remains in
these cases constant and we don’t have to consider it. In case of an capital change accord
ing to the balance sheet however one has to consider these capital changes in the analytical
calculations accordingly as investment in equipment or transformation in wages or salaries
or even other usage for instance as physical energy. In this study we will not write our
equations with c anymore because this does not influence the principals of our thinking and
there will also be no influence on the derivations and results in our mathematical treat
ment. In other words we make it a little bit easier for us.
The inner energy of an economic system changes according the flow of physical goods q
or products according to
A u
q
= Aq
12
(3.10)
The same applies to the change of the production factor w, i.e. the nonphysical flow of
money equivalents
A u
w
= Aw
12
(3.11)
and just for the sake of completeness
A u
c
= Ac
12
(3.12)
The physical energy q
i
which leaves for instance a production company as  q
i
may cross
the system boundaries of another economic system of a customer as + q
j
. The electrical
currant leaving a power station has for this economic system the total value Q = E q
i currant
.
For a user of electrical currant the change of his inner energy will then be +q
j currant
.
35
During economic processes like for instance the generation of electrical currant in a power
plant we always have losses v, which are generally irreversible and are therefore a produc
tion of anergy. This quantity v
irr
could be composed of q – energy as well of w energies.
We can write
v
irr
= q
irr
+ w
irr
(3.13)
Irreversible wlosses can be developed by friction between departments or sections
whereby the originally exergetic w energy is transformed in useless w anergy (“heat in
form of shouting at each other”). This type of misuse of energy, here assumed for instance
between human beings, will not add to the production of an economic system. The quanti
ties dq
irr
and dw
irr
are used for the coverage of system losses like scrap, expendable mate
rial, efficiency losses, friction losses etc. Such system losses require often very large
amounts of energy and therefore money.
In case that a state u
2
is identical with the state u
1
of an economical system,
u
2
= u
1
(3.14)
it follows that
du = 0 (3.8)
and
A q
21
+ A w
21
= 0 (3.15)
The money equivalent or the energy of the transfer of physical energy q is in this case
equal to the energy of all nonphysical money transfers crossing the system boundaries
however with different signs:
Aq
21
= A w
21
(3.16)
We arrive here at the law that no economic system can produce effects outside of its sys
tem boundaries without changes of its inner energy by a flow of energy across the system
boundaries. This means:
 An ecodynamic pertuummobile is impossible
The fact that an economic system cannot originate any effect outside its system boundaries
without a transfer of energy across these boundaries can be proven using the Theorem of
Momentum of physics. This theorem plays an important role in thermodynamics for the
kinetic theory of gases. In an abridged version we obtain for economic systems:
The impulse of a system of mass points i.e. the particle of a system, like the working peo
ple in this system, is defined as
I
G
= E I
i
(3.17)
The total momentum (impulse) I
G
is the sum of all single impulses of the system particle
with the impulse where I
i
is
36
I
i
= m c (3.18)
That is the product of the mass and the velocity of the particle. It is possible to derive at the
equation
I =
}
kdt (3.19)
saying that the impulse is given by the time integral of the tensor force on the point of
mass.
Using the vector treatment we find that the tensor forces k
i
inside a system annihilate each
other which means that the total impulse of a closed system in absence of outer forces is
constant because of
E k
i
= 0 (3.20)
For economic systems this implies that a closed economic system cannot develop any im
pulse outside its system boundaries. This is in full agreement with the first law of
ecodynamics.
We shall now treat some quantitative details of the first law:
 Details of Intensive State Functions
Intensive state functions like the energy equivalent w of monetary transfers are the combi
nation of the unit of a quantity and a corresponding constant, which describes the proper
ties of the quantity. Generally formulated:
w ÷ E ¢
i
y
i
(3.21)
where ¢ is a constant value with the dimension of an energy per unit y and y with the di
mension of a unit of quantity. For instance ¢ = Joule per Dollar or Euro and y = Dollar or
Euro. The product therefore has always the dimension of energy.
If we assume that ow is not a total differential i.e. it is way depending, we can divide ow
into differential quantities. In case for i = 2 we obtain
o w = ¢
1
dy
1
+ ¢
2
dy
2
(3.22)
If we transfer moneyenergy equivalents from one economic system into another economic
system both systems will encounter a change in energy. For the system that delivers energy
we can write
o w =  ¢ dy (3.23)
For a finite change we obtain:
}
¢ ÷ = A
2
1
12
dy ) y ( w (3.24)
37
For the functions ¢
y
= ¢ (y) and ¢
y
= constant we derive at the following diagrams Fig. 2
and Fig 3:
¢ ¢ = ¢(y) ¢ = const.
¢
1
¢
¢
2
y
1
y
2
y y
1
y
2
y
Fig. 2 Fig.3
The analogue results we will obtain treating the quantity q.
The First Law of Ecodynamics can therefore be written:
du = ¢
q
dq + ¢
w
dw (3.25)
The quantities ¢
q
and ¢
w
may be functions of other quantities or state functions. In this case
we have to write:
o w = E ¢
i
(y
i
, z
i
) dy + dz (3.26)
With the help of integrating factor µ equation (3.22) becomes
dw = µow = (µ¢
1
) dy
1
+ (µ¢
2
) dy
2
(3.27)
with the condition for integration
2 y
1
2
1 y
2
1
) y (
) (
) y (
) (


.

\

o
µ¢ o
=


.

\

o
µ¢ o
(3.28)
This integrabillity condition cannot be arrived with equation (3.26). Therefore one has to
look if the dependencies according to equation (3.26) have to be considered or could be
neglected in a first approximation. This is probably generally the case. Therefore we shall
neglect ¢dependencies in this study.
With the foregoing we have developed equations for the quantitative treatment of eco
nomic processes with the help of specific energy data or their equivalents together with the
corresponding mass quantities, i.e. the transfer from intensive to extensive quantities.
 Influence of process velocities
All processes in ecodynamics need a time t for their completion i.e. they have a specific
“velocity”. Because the velocity of the flow of a process can have a great influence on the
38
process itself for instance with respect to quality or efficiency of the processes it might be
important to consider the following facts:
Starting with the equation of the first law
du = oq + ow (3.29)
and
dq = t
t

d q
) (
(3.30)
and
dw = ot
t

w (3.31)
we can write
t
 
t
+ =
t
w q
d
du
(3.32)
The quantity

q represents the flow of physical energy crossing the system boundaries in the
time t and

w the flow of money crossing the system boundaries in the time t
The equation (3.32) demonstrates that the inner energy of an economic system may exhibit
large changes in time. The time dependency of the efficiency of the process in an economic
system, for instance given by the turnover w
v
of a product q, determines the amount of
work done during a process:
ot
o
=
t

v
) ( v
w
w (3.33)
}
t =
t

d w w
) ( v
21 v
(3.34)
Based upon the following experiences
o High efficiency is usually much more expensive than somewhat less high efficiency.
(One needs more energy),
o High efficiency requested for short periods of time are usually not used to their full
extend because of limits in the speed of processes or of technical limits of the speed
of energy transfer.
o Many processes have a certain process speed given by natural laws, which cannot be
influenced with the result that additional applied energy will do nothing but to be
converted in anergy (and additional entropy).
o With increasing speed of processes we generally observe a possibly rather fast
increase of losses by friction, in many cases larger than proportional to the energy
input. This means a waste of exergy, additional anergy and an increase of entropy.
o etc.
39
We must conclude that a high input of energy in a short time not necessarily results in a
positive development of the efficiency or the output of an economic system. The input of
smaller quantities over a longer period of time could be much more effective. Further we
must consider that shortterm peaks of efficiency have only a very remote influence on the
total efficiency. The speed of transport of physical material from the point of goods re
ceived to the point of outgoing goods usually has physical limits. (If one Chinese builds his
house in one year even 300 Chinese can’t do it in one day).
 Coefficients
In the following we will develop some coefficients which might be useful for comparisons
between various economic systems or for following up the development of a company or
state over the time.
As we have seen the state of an economic system can be described by
u = u (q, w) (3.6)
If we now assume that the inner energy u is continual differentiable than follows
du = dw
w
u
dq
q
u
q
w

.

\

o
o
+


.

\

o
o
(3.35)
or
du = X dq + Y dw (3.36)
The coefficients X and Y may be constant or be functions of the state functions.
We know that
}
= 0 du (3.4)
i.e. that the Inner Energy u will not change anymore after the system comes back to its
original state. If in a mathematical sense du is a complete differential we can write
w
q
q
Y
w
X


.

\

o
o
=

.

\

o
o
(3.37)
In case of equilibrium of an economic system with the state functions u, q and w we can
also write the function
f (u, q, w) = 0 (3.38)
where
u = u (q, w)
q = q (u, w) (3.6)
w = w (u, q)
As we have already written it follows that
40
1
u
w
w
q
q
u
q u
w
÷ =

.

\

o
o

.

\

o
o


.

\

o
o
(3.7)
with the minus sign because with a constant inner energy u the quantities q and w ex
change each other (equation 3.16).
If we now take the reciprocal value of
q
u
o
o
and divide it by u
o
we obtain the specific
change of q depending of u with constant w:
w 0
u
q
u
1

.

\

o
o
= ì (3.39)
Because q represents generally a flow of material we define ì as the coefficient of flow of
material:
ì = Coefficient of Flow of Material
The reciprocal value of
w
q
o
o
divided through the specific value q
0
results in the specific
change of w depending of q with constant u:
u
0
q
w
q
1


.

\

o
o
= ¸ ÷ (3.40)
This dependency with constant inner energy we call displacement coefficient because w
and q can displace each other
¸ = Displacement Coefficient
The minus sign of ¸ results out of the validity of the first law where an increase of q with
constant u will result in a decrease of w.
The reciprocal value
w
u
o
o
divided by the specific value w
0
results in the specific change of
w depending of u with constant q
q
0
u
w
w
1

.

\

o
o
= o (3.41)
Because w is the indication of work in an economic system we call this coefficient the
work coefficient, which is identical with the coefficient of value added.
o = Work Coefficient (value added coefficient)
Using now equation 4.7 we arrive at the equation
41
o = u
0
ì ¸ (3.42)
The Work Coefficient o is directly proportional to the Inner Energy of an economic system
as well as the to the coefficient of Material Flow and the Displacement Coefficient. This
equation shows the correlation between the dependence between state functions of an eco
nomic system. For instance one can see that a complicated or hampered flow of material
make the production more difficult or decreases the inner energy respectively.
In combination with the first law du = dq + dw and o = u
0
ì ¸ one can for instance cal
culates what happens if q or w are changed while u remains constant or what happens if u
and w are changed with q remaining constant, etc. Furthermore one can use these coeffi
cients to follow up the development of different economic systems.
42
3.3 The Second Law of Ecodynamics
3.3.1 General Treatment
The first law of ecodynamics answers our questions on the balance of energy within an
economic system, between a group of economic systems in a control room or of a national
economic system or even the world economy.
Because of the first law we can say the state of an economic system at the beginning of a
process and the state of this system at the end of the process correspond to each other
based on a balance of energy. But with the help of the first law we are not able to find out
what economic processes are actually possible and in what direction they will move. Like
in thermodynamics it is only possible to obtain answers on these questions of ecodynamics
with the help of the second law of ecodynamics.
Like the first law the second law is as well born out of experience but no processes in na
ture are known that would be in conflict with this law either. Since the development of the
statistical physics and the quantum mechanics it possible to prove the second law of ther
modynamics as the law of the entropy quantitatively. We will use these methods for the
treatment of the second law in ecodynamics, too.
On the bases of our general experiences we know that there are very many processes,
which cannot be reversed. For instance nobody was able to demonstrate that heat, which
was originated through friction by rubbing a body on the surface of a plate, would get this
body moving by itself using this heat. This is impossible although there would be no con
flict with the first law of thermodynamics, the sentence of conservation of energy. We call
this a ‘Perpetuum Mobile of Second Art’ if a heated body would start to move while cool
ing down. With an almost infinite probability this will not happen. This is also the reason
why an Ocean Liner cannot use the almost unlimited heat energy contend of the oceans to
get his screws turning.
With the above observations we can make an important conclusion of what the second law
tells us: All processes we observe in natures cannot be reversed as such, they are irreversi
ble.
Max Planck gave this classical formulation of the second law of thermodynamics:
 It is by no means possible to reverse a process completely where heat is originated
through friction.
Based on this principal statement of the second law we are in the position to draw the fol
lowing very important general conclusion of the properties of economic systems in ecody
namics.
Economic systems, which use energy for „inner friction“ or for „friction among each
other“, produce irreversible damages of the economic systems in question. It is of no im
portance if the origin of this friction is mismanagement, this also includes mistakes or fail
ures of governments or merciless competition, i.e. war of states or war of companies. The
results are always irreversibly negative.
43
It was probably W. Thompson, the later Lord Kelvin (1824 – 1907), who was the first to
conclude that a perpetuum mobile of second art is impossible. Therefore this statement is
also called the Kelvin statement of the second law.
Clausius (18221888), the discoverer of the second law said:
 There will be no periodically working machine, which will take heat out of a
cooler warmbath just to transport this heat to a hotter warmbath.
We have to put our attention to two details of this formulation. “periodically” means here
that we consider a closed cycle and “just to transport” means that there will be no changes
in the surrounding environment.
We will see that the Clausius definition of the second law applies to all processes in the
economy regardless if we look at national economy, the economic results of political deci
sions or other economic processes. All economic processes initiated by man depend ir
revocable on the resources of the nature we live in. All these processes are irreversible and
will therefore have irreversible consequences on the system nature. We also have to con
clude that this general irreversibility will have negative consequences for the art of man.
Whether these negative consequences will be of short term or long term depends on the
types of the processes.
In this study we take it for granted that both laws of thermodynamic are generally valid and
can be applied to all systems of economy. This has the consequence that all processes initi
ated by man are energetic processes, i.e. regardless of what we do for every action we need
energy. On this basis we can formulate the second law of ecodynamics:
 No economic system is able to deliver work without energetic changes in the sur
rounding environment of this system, which depend on the work or processes of
this economic system.
 It is impossible to reverse economic processes completely if there are losses origi
nated by friction of any kind
 It is not possible to reverse the expansion of an economic system into an economic
vacuum without permanent negative changes of the surrounding environment be
cause of the entropy increase.
 An economic system of low energetic level is not able to deliver the result of its
economic processes to another economic system in a surrounding control room
with a higher energetic level without an additional energetic input from the control
room.
The second law delivers the necessary and adequate criterions to learn if a process may be
reversible or is irreversible. One of the central statements of the second law in this connec
tion says that all natural processes are irreversible.
The question if it is possible to reverse an economic process depends only on the state of
the economic system at the start and the end of process respectively but not of the way
44
such a process actually takes. Of importance for the (theoretical) reversibility only is the
question if it is possible to regain the state at start again without any change in the envi
ronment of the economic system, i.e. in other economic systems.
The second law delivers for any actual economic process the relations, which describe both
the state at the beginning and the state at the end of a process. For the irreversible eco
nomic processes it turns out that certain quantities at the end of the process are different
from the start of the precess. If a process is reversible both quantities must be the same.
It might look to the reader that we are repeating the same argumentation with different
words. This is true but it is necessary that the reader makes it absolute clear to his mind to
distinguish between the theoretical reversibility and the irreversibility of everything that
happens in nature. We can now conclude:
From what we have said so far it must be a mathematically consequence that the second
law can only be an unbalanced equation, an inequality, saying that a depending economic
quantity of the state of the system has a different value at the end of a process than it had at
the beginning of the process.
Based on the second law we are to conclude that all systems in nature and therefore all
economic system, too, must have a state function with the feature to remain either constant
or to increase during a process. The first feature is possible only with the theoretical think
able reversible processes while the latter always occurs with irreversible processes, i.e. all
effectively observable processes. Following Clausius (see chapter 1) this state function is
called the entropy of the examined system. On this basis we may state that every transfer
of money aiming at the purchase of a material good increases the entropy in general, i.e. of
the world. The proof for this statement we will deliver in the next chapters.
Although in reality all economic processes are irreversible we have to consider reversible
processes as the ideal borderline for treating the economical laws theoretically, i.e. mathe
matically. The laws we obtain on the basis of treating processes in this way as quasistatic
processes will generally be valid and can be transferred to irreversible processes. Herewith
we follow the treatment of these problems as applied in the classical thermodynamics.
45
3.3 Second Law of Ecodynamics
3.3.2 Quantitative Treatment 1
The mathematical treatment of the second law in the next three chapters uses different
ways to facilitate the understanding of this most important law in ecodynamics. It is not
our aim to prefer one or the other thinking but our approach might help to obtain a better
feeling for the subject. As this study is no textbook in thermodynamics, physics or mathe
matics we use the equations of these scientific fields without derivations. The interested
reader is referred to the corresponding literature.
For the following considerations we assume an infinite large economic system WS
X
, con
sisting of the subsystems WS
1
und E WS
i
= WS
Y
:
WS
X
= WS
1
+ EWS
i
= WS
1
+ WS
Y
(3.43)
The conditions are that the index i >> 1 and WSy >>WS
1
. Further more the total system
WS
X
is enclosed by system boundaries that isolate this socalled control room, Fig. 4.
Isolated Control Room
Fig. 4
We are looking now for a process in the system WS
1
where at the beginning the state of the
systems WS
Y
and WS
1
is equal the state Z. After the process is finished the state of the
economic system WS
X
is still Z because WS
Y
>> WS
1
while the state of the system WS
1
is
now Z
1
. We can write
dz = Z
1
– Z (3.44)
Which means that we are looking only at a very small infinitesimal change in this control
room.
In accordance with the definition of reversible processes we define the change of state
from Z to Z
1
as reversible if Z · Z
1
, i.e. the change of state can go in either direction.
However the change of state from Z to Z
1
is irreversible if only Z ¬ Z
1
is possible but Z
1
¬Z is impossible.
WS
X
= WS
Y
+ WS
1
WS
Y
= E WS
i
dw
0
dq
0
State Z
WS
1
46
In the reversible case the probabilities of the both states Z und Z
1
are equal. In case of irre
versibility the transition of the economic system WS
1
from state Z in state Z
1
is possible
but not the way back. The inner energy u of the economic systems WS
Y
and WS
1
in state Z
can be described with u = u (q ,w) and the inner energy u
1
of system WS1 in state Z
1
with
u
1
= u
1
(q, w).
We are now looking in the details of the process. For the first step we assume that the eco
nomic system WS
1
is a closed system with adiabatic system boundaries which means that
the transfer of physical energies q are not permitted, i.e. dq = 0. On the other hand with
such a system the transfer of nonphysical energy as for instance money equivalents are
permitted. We can write therefore
dw
0
= c oy (3.45)
There will be however no change of the inner energy u
y
of the system WS
Y
because of the
infinitesimal change and WS
Y
>> WS
1
. That implies that the first law of economics is
valid without restrictions.
With dq = 0 we can write according to the first law for the system WS
1
du
1
– dw
0
= dq
0
= 0 (3.46)
With u = u (q, w) we obtain generally
dw
w
u
dq
q
u
du
o
o
+
o
o
= (3.47)
Combining the equations (4.46) and (4.47) it follows that
0 dw dw
w
u
dq
q
u
= ÷
o
o
+
o
o
(3.48)
or
0 dw 1
w
u
dq
q
u
=

.

\

÷
o
o
+
o
o
(3.49)
This type of differential is an incomplete differential, in this case a function of q and w.
Mathematically it is possible to change such incomplete differential into a complete
differential by applying a socalled integrating factor. If we call such integrating factor 
’
we can write for the equation (4.46)

’
du
1
 
’
dw
0
= 
’
dq
0
= ds
0
(3.50)
We therefore arrive at the finite function s of 
’
und w.
As well as the state function u as the inner energy of an economic system resembles a
property of this system the same applies to the quantity s as a state function of this eco
nomic system. According to Clausius we call this state function s the ‘Entropy’ of the sys
tem.
47
The integration factor as such can be freely chosen. Here we say that 
’
is a positive quan
tity and as such larger than zero, 
’
> 0.
Using equation 3.46 written as
du
1
– dw
0
= 0 (3.51)
we can also write

’
du
1
 
’
dw
0
= ds
0
(3.52)
The important result at this stage is that the entropy s = const. because ds
0
= 0. This is the
general statement valid for reversible adiabatic conditions. With the input of none physical
energy dw for instance in form of money equivalents for the workers in the system WS
1
or
even in form of capital equivalents we have neither a change in entropy in system WS
1
nor
the system WS
Y
. Therefore the same is true for the total system WS
X
, with s = const.
For a second step of the process within the economic system WS
1
we leave the adiabatic
condition of the system boundaries and transfer a differential amount dq
0
of physical En
ergy, say some production material, from the reservoir WS
Y
into WS
1
. For the whole sys
tem the first law is still valid without any restriction because nothing has changed energeti
cally for the total system WS
X
.
In addition to the transfer of dw
0
we have now a transfer of dq
0
. For the first law we must
therefore write for WS
1
du
1
= dq
0
+ dw
0
(3.53)
and for WS
Y
du
y
= dq
0
 dw
0
(3.54)
transforming these both equation we arrive at
dq
0
= du
1
– dw
0
(3.55)
and.
dq
0
= du
y
+dw
0
(3.56)
The transition to look at the development of the entropy in our complete system we apply
once more the integrating factor and obtain

’
du
1
 
’
dw
0
= 
’
dq
0
= ds
01
(3.57)
and

’
du
y
+ 
’
dw
0
=  
’
dq
0
= –ds
0y
(3.58)
We must conclude that the entropy condition of the total system WS
X
has not changed.
But the increase of entropy of the system WS
1
is compensated by a decrease of entropy of
the economic system WS
Y:
ds
01
 ds
0y
= 0 (3.59)
48
Our third step now will be the production of the new product dq
1
with dq
0
with the energy
dw
0
by the workers in the economic system WS
1
. For simplification we assume a produc
tion without any losses. This results in
dq
1
= dq
0
+ dw
0
(3.60)
The energy balance of the whole system WS
X
according to the first law has not changed
through this production process. For the system WS
X
we receive with
dq
1
= dq
0
+ dw
0
(3.61)
and
du
1
= dq
0
+ dw
0
(3.62)
at the end of the process
du
1
= dq
1
(4.63)
This means that the total energy of dw
0
was transferred into the product dq
1
and is therefore
not anymore present in the original monetary form. The workers in the system WS
1
have,
stimulated by the payments, this payment transferred as energy into dq
0
for the creation of
dq
1
. They have created a “Value Added”.
The change of the inner energy of the economic system WS
1
by the described ecodynamic
process is therefore equivalent to the value of dq
1
.
For the entropy of WS
1
(now with dw
0
= 0 !) and for the total system WS
X
with
du
y
= dq
0
 dw
0
it follows that

’
du
1
 
’
dw
0
= 
’
du
1
= 
’
dq
1
= ds
1
(3.64)
and

’
du
y
+ 
’
dw
0
= 
’
dq
0
=  ds
0
(3.65)
For the total system WS
X
we arrive with dq
0
< dq
1
at the important result that the entropy
has increased by the amount of
ds
1
– ds
0
> 0 (3.66)
This conclusion is entirely independent of the location of the product dq
1
, if it remains
within WS
1
or is exported to WS
Y
because both systems belong to the same control room.
The increase of the entropy in the economic system WS
1
as a result of the economic proc
ess in this system means that according to the validity of the second law of ecodynamics
the production of a product with the help of a value added dw
0
and the supply of physical
energy dq
0
results in an increase of entropy of the whole enclosing system. This is a fun
damental statement because of the reality of the irreversibility of all of our doing does not
permit any reversibility of economic processes.
As soon as the economic system WS
1
has delivered the product dq
1
outside its system
boundaries  the money equivalents for dq
0
and dw
0
shall correspond to the sale proceeds 
the inner energy of the system WS
1
will be the same as before the production process. The
49
system WS
1
has gone through a cycle process and has therefore arrived at the original state
Z.
Because of the validity of the first law of ecodynamics there is no change of inner energy
of the system WS
X
. But, and this is the important point, the entropy increase
ds
1
 ds
0
> 0 (3.67)
is unalterable. The total system WS
X
changed into the state Z + dZ with dZ· ds.
We have now to connect the term entropy as we have arrived here in ecodynamic thinking
with the term entropy of thermodynamics and the integrating factor ’. In the classical
thermodynamics one uses not an integrating factor but in integrating denominator N which
is mathematically the same. In thermodynamics it is shown that this denominator corre
sponds to the thermodynamic temperature and actually is the definition of this temperature.
In thermodynamics the equation for the entropy is therefore
ds
T
dq
= (3.68)
This is about one of the most important equations of the thermodynamics and therefore of
the ecodynamics, too. But, and we have already pointed out that a temperature does not
makes sense in ecodynamics. This problem we will tackle later where we also learn that
the integrating denominator N of the thermodynamics and the above used factor ’ are
correlated by
’ =
T
1
= k  mit  =
kT
1
(3.69)
For the equation of entropy in ecodynamics we can write than
ds = k  dq (3.70)
The factor k represents the socalled Boltzmann Constant. The equations 3.69 and 3.70 are
also the results of the derivation of the entropy on the basis of the statistical physics and
the quantum mechanics we are treating in the next chapter. The important factor  in the
ecodynamics we will look for in more detail in chapter 3.4,
50
3.3 The Second Law of Ecodynamics
3.3.3 Quantitative Treatment 2
For the following, we assume that an economic system consists out of very many „parti
cles“ and can be described therefore applying the laws of statistical physics. As particles
we consider principally each Dollar, each Euro, every worker in an enterprise, every tool,
machine, i.e. every subject/object within an economic system.
The applied mathematical interrelationships base physically on the assumption that eco
nomic systems exhibit distinct states of excitation. Each economic system therefore has de
fined states of energy. One main problem would be in this case that we might have to
quantify each of these energy states. Fortunately, it comes out that this will not be neces
sary, otherwise our task would become insoluble.
We furthermore postulate that each particle in an economic system can have only two
states of excitation, for instants ‘Yes’ or ‘No’. In other terms each particle has two degrees
of freedom f = 2, which are contrary in their direction as + A and –A. In this respect the
economic system, correspond directly with binary information systems. This correlation
makes a direct transition between economic and information systems possible.
Under these assumptions the nonphysical energies w will have a yes or noorientation of
each particle (for instance the workers) of the economic system and therefore of the proc
esses of these systems.
Based on this point of view each worker in an economic system as well as every activity
and action sequence in an economic system has two degrees of freedom.
Theoretically we can describe the properties of an economic system in any detail as long as
we have precise and complete information on the microscopic state of this system at every
time. Such complete information will practically be never available. The methods of the
probability theory however permit the determination of the macroscopic states of economic
systems with adequate accuracy. The result will be a macroscopic description of our sys
tems, which will be sufficient for us. Additional information on the microscopic states of
all particles will not give additional usable information beside the fact that we don’t have
the means to work out such systems mathematically as mentioned already.
Measurable outside parameters which are able to cross the system boundaries will have ef
fects on the states of excitation f of the particles within the system. Therefore, each state of
excitation is a function of outside parameters.
Further, we have to take into consideration that conditions of the initial state as well as the
final state of an economic system may have restrictive conditions. For instance, a closed
system has always to obey the first law of thermodynamics or ecodynamics respectively.
The particles of a system can only adopt conditions, which are in accordance with this law.
In case of equilibrium of an isolated economic system the probability of the occurrence of
all possible and realisable states in this system are equally high. This corresponds to the
postulate in statistical physics of equal apriori probability.
51
For the case that an isolated economic system, a system with no measurable outside influ
ences, is not in equilibrium it will change its internal states with time but we will not be
able to determine details of these changes in time. We only can make remarks on the direc
tion of these changes but not on the time in which this changes will occur i.e. we cannot
say when this system will arrive at the equilibrium. This time is called the ‘Relaxation
Time’. This is an important statement for which we will give an example.
For a country or state which isolates itself totally, as for instance the former Albania, it is
not possible to determine with sufficient accuracy after what time of relaxation the country
will arrive at equilibrium. In this case, equilibrium means also a state of the Maximum of
Entropy, which would be equivalent with the economic death of such a system. By all what
we know the former Albania must have been close to this final stage when the political
change occurred. The economic development of the former eastern bloc states moved on
the bases of the second law of ecodynamics in the direction of an economic collapse, too,
without the possibility to determine the time of relaxation.
In the following, we will not deduce the results of statistical physics or quantum mechanics
used. These laws and equations are explained in the corresponding literature and the inter
ested reader may refer to these publications. We will give here only the explanation neces
sary for further understanding.
If O represents the number of states an economic system may have, then the system is in
the state of equilibrium when all possible and realizable states are equally probable with
1/O. An economic system with the inner energy U, in this case it’s the extensive inner en
ergy, has in a first approximation
O
(U)
≈ (U– U
0
)
F
(3.71)
states, where U
0
represents the inner energy of the basic state and F the number of degrees
of freedom of the system. F is a very large number, even larger than 10
10
, as we will see
later. On this basis we can write for O
ln O
(U)
≈ F (3.72)
The natural logarithm of the possible number of states of an economic system with the in
ner energy U is proportional to the number of degrees of freedom in a first approximation.
We have mentioned above that an isolated system may have certain secondary conditions.
Such conditions we can describe as macroscopic parameters y. These secondary conditions
limit the number of possible states in a closed economic system, i.e. the number of possible
states O is a function of y
O = O(y) (3.73)
If we have O
i
states of a system without any secondary conditions and O
y
states where y
secondary conditions are applied upon the system then we can calculate the probability that
the O
y
 states will occur some time once more even in case that the secondary conditions y
will be not be valid any more with
52
P
y
=
i
y
O
O
(3.74)
Because generally O
i
>> O
y
, we can conclude that this case is very unlikely. This means
that such processes in isolated systems are irreversible. For this we will look at a simple
example:
A production company increases it floor space A by an addition B of the size B = ¼ A. We
now ask the question how large is the probability that the addition B remains empty after
completion without the application of “energy” or, what is the probability that the addi
tional floor space will get empty after being occupied without the application of “energy”?
With “energy“, we define here any measurement taken by the management. The answer for
these questions depends on the number of “particles” in the economic system. In this case,
we assume that on the floor space A twenty workers are working on 50 different worksta
tions with two boxes of material at each station. This sums up to N = 170 “particles” on
floor space A. For the realizable states O we obtain the factor [(A+B)/A]
N
and therefore for
O
i
:
y
N
i
A
B A
O
(
¸
(
¸
+
= O (3.75)
With equation (3.74) the probability P that the floor space B will remain unoccupied or be
free once more by chance will be
P =
i
y
O
O
=
y
N
y
A
B A
O
(
¸
(
¸
+
O
=
N
25 , 1
1
(3.76)
170
170
10
25 , 1
1
P
÷
~ = (3.77)
It is therefore almost with certainty impossible that the floor space B will remain or be
comes free once more without strict measures of the management which may cost a lot of
energy. This observation is in full agreement with the general experience (at least accord
ing to my experiences) that any free space in an economic system will be occupied uncon
trolled if no sometimes very costly measures are taken to avoid this.
We now will look at two economic systems A an B with the inner energies U
A
und U
B
.
Both systems are positioned in an isolated control room. The numbers of states the systems
may realize are O
(UA)
und O
(UB)
. A secondary conditions says that the exchange of non
physical energy w between the both systems is not permitted i.e. both systems can only ex
change physical energy q. Our task is to find a relation for the entropy of both system.
The starting conditions are
U
A
+ U
B
= U
ges.
= const. (3.78)
U
B
= U
ges.
 U
A
(3.79)
53
The possible number of realizable states of the total system is O*, whereby the economic
system A has the inner energy U
A
given by the product
Ω
*
= Ω
(UA)
Ω
(UB)
= Ω
(UA)
O
(Uges. – UA)
(3.80)
The probability that the system A has the inner energy U
A
is then given by
P
(UA)
= C Ω
(UA)
Ω
(Uges. – UA)
(3.81)
with C = 1/O
*
ges.
= const and O
*
ges.
the total realizable number of states in the combined
system.
It was already pointed out that the number of degrees of freedom within an economic sys
tem is very large. This has as a consequence that the number of states increases rapidly as
this is a function of F (equation 3.72). As a result of this we observe that the probability P
for U
A
has a sharp peak maximum. The value of the inner energy U
A
at the maximum of
the probability P
(U)
follows out of the general condition
0
U
W
W
1
U
P ln
=
o
o
=
o
o
(3.82)
Together with equation (3.81) in logarithmic form
ln P = ln C + ln Ω
(UA)
+ ln Ω
(UB)
(3.83)
and equations (3.79), (3.82) we transform equation (3.83) to
( )
0 ) 1 (
U
U
U
ln
B
B
A
UA
= ÷
o
o
+
o
O o
(3.84)
Now we define
A A
U
U U
A
o
o
o
o

O
O
=
O
=
1 ln
) (
(3.85)
or written in general terms
U
1
U
ln
o
O o
O
=
o
O o
=  (3.86)
With the socalled principle of Boltzmann we define the Entropy as the probability of a
state according to
S = k ln P (3.87)
This is the equation of the Entropy as a function of the probability as written 1906 for the
first time by Max Planck in connection with the also by Planck introduced Boltzmann
Constant k. Einstein wrote this equation in the form
P = e
S/k
(3.88)
54
i.e. the probability as a function of the entropy.
As a result of our derivation so far we learn that the quantities lnO and  are important
quantities for describing the entropy of an economic system. The quantity O is only of im
portance showing that we deal with the logarithm of a very large number. The value as
such is of no interest to us, as mentioned at the beginning of this chapter.
The value  has the dimension of a reciprocal energy
U
1
o
O o
O
=  [J
1
] (3.89)
The probability P of the state of an economic system is a measure for the number of states
of excitation O i.e. that ln O is a measure of the probability. The entropy is therefore the
logarithm measure of the possible States in an economic system
S = k ln Ω (3.90)
As ln O is without dimensions it follows that S has the dimension of k as the proportional
factor with [J/K], (Joule/Kelvin).
With the equation (3.86)
U
ln
o
O o
=  (3.91)
it follows that
S = k β U (3.92)
or
ds = k β du = k β (dq + dw) (3.93)
with du = dq + dw according to the first law of thermodynamics.
The presented thought we started with the condition that we permitted an exchange of dq,
i.e. dq = 0 and the secondary condition that no w exchanges were permitted, i.e. dw = 0.
Furthermore no outer parameters were permitted, we are looking at an isolated system.
With the result of the presented derivation according to the statistical physics
U
1
U
ln
o
O o
O
=
o
O o
=  (3.86)
it follows that
ds = k  dq (3.94)
 The entropy of an economic system is given by the energy dq, which crosses the
system boundaries while the outer parameters remain constant.
This is the same result as obtained in the forgoing chapter (equation 3.70) with an entirely
different derivation. The entropy is the quantitative measure of the degree of chaos or the
coincidences of an economic system.
55
 The maximum of the probability of the state of an economic system corresponds
with the maximum of the entropy of the system. In a system that has reached this
state nothing happens any more, the system is dead.
We can write therefore
S
ges.
= S
A
+ S
B
= max. (3.95)
and
β
A
= β
B
(3.96)
for the case of the both systems U
A
und U
B
.
Equation (3.96) is a strong indication that β is a constant. In other words this means that
manmade systems are not temperature dependent. We may add that these systems are also
independent of pressure. It must however be pointed out very strongly that this isothermal
and isobar behaviour is valid only for economical systems but not in thermodynamics. This
is one of the reasons why the derivations and equations in thermodynamics are much more
complicated than in ecodynamics.
56
3.4. The Second Law of Ecodynamics
3.3.4 Quantitative Treatment 3
On the basis of the first and second law a process in an economic System WS
1
is possible
only if it receives physical energy q
1
for instance from a system WS
2
and non physical en
ergy w
1
as for instance from the economic system WS
3
as shown in Fig. 5. All economic
systems in this figure are located in an isolated control room. We will follow up the proc
ess of the product q
2
and its sale to the economic systemWS
4
in detail.
Fig. 5 Isolated Control Room
We start with the condition that the production system WS
1
will be at the end of this whole
economic process in the same state as initially. For this we can write
}
= du
}
1
dq +
}
1
dw = 0 (3.97)
The both closed integrals
}
1
dq
and
}
1
dw
can be different from zero because they are not
dependant on the way of the process necessary.
The economic system WS
1
moves through various process stages exchanging energies
with the other three economic systems in the same control room. By the order of WS
1
the
bank, WS
3
pays the economic system WS
2
the money for the primary product q
1
from its
bank account, q
1
will than be delivered to the purchasing system WS
1
. FURTHERMORE,
WS
1
obtains the money w
1
from its bank account with WS
3
to pay its workers to do their
job by producing a new product q
2
starting with primary product q
1
. Finally, the production
company WS
1
sells the new product q
2
to the customer system WS
4
that pays the price of
q
2
on the banking account of the economic system WS
1
.
What has happened in the isolated control room where we neglect all costs originated by
nonproductive material, scrap etc.? This simplification does not change anything of the
principals we are looking for.
q
1
q
2
w
1
Price q
1
Price q
2
WS
2
WS
4
WS
1
WS
3
57
The production company WS
1
manufactures out of q
1
and with the energy w
1
the new
product q
2
and sells it to the customer system WS
4
. During the production process of q
2
we
have an increase of the entropy of the production company according to the purchase of the
primary product q
1
and the input of the value added w
1
for the production of q
2
. The en
tropy of the new product q
2
is than transferred to the purchasing customer WS
4
.
The inner energy u
WS2
of WS
2
has not changed during the whole process because it re
ceived the same monetary energy as price for q
1
as delivered as primary product q
1
to WS
1
.
However, the entropy of WS
2
has decreased by the same amount as the entropy of WS
1
has
increased.
The inner energy u
WS1
of the production company however has changed by
q
1
+ w
1
= q
2
= A u
WS1
. (3.98)
By the sale of the product q
2
to the customer company WS
4
the inner energy of the produc
tion company WS
1
is reduced to the original value before the whole production process
started. The inner energy of the customer company WS
4
however increases by A u
WS4
= q
2.
For the bank we have no change in the inner energy, as the final state is the same as the
original state.
For the total process in this isolated control room the conditions of the first law of ecody
namics are fulfilled as energy was neither created nor destroyed. With the entropy the pic
ture is quite different. Because of q
2
> q
1
we have an increase of entropy in the economic
system WS
4
with the amount of
A s = k  w
1
(3.99)
Conclusion: Each production process in an isolated control room increases the entropy of
that control room. As we must consider our planet as an isolated control room in the sense
of our discussion here we have to take it that the entropy on earth will increase by the ac
tivities of men in the almost infinitesimal number of economic system at any time. The
Question remains if there is a possibility to reduce this entropy increase to a measure that
further generation might have a chance to live, too.
With the abovediscussed example we can look at two other points. We had said that we
would not consider all losses like scrap, primary products etc. If we would ask for the effi
ciency of the process without considering these losses we would arrive at the result that
q =
1 1
2
w q
q
+
= 1 (3.100)
i.e. that our efficiency was 100 %.
This would be possible by the first law of ecodynamics but not by the second law. We have
to consider all losses v
prod.
during the production process. Taking these losses into account
we will see that the efficiency will became much smaller than one:
58
q = =
+ +
. 1 1
2
prod
v w q
q
< 1 (3.101)
This result is in full agreement with the second law and it shows that all losses during eco
nomic processes increase the entropy even if it would be losses by friction only.
A further observation might be added here. An observer / controller with a position outside
of economic systems or outside of a control room is not able to distinguish between q and
w values inside an economic system. From the outside he can only determine that there is a
change of the inner energy u of a system during a process. He can’t see and has no knowl
edge from the outside what is going on in detail. He therefore can judge only by the results
of changes of the inner energy as such. This is certainly one reason for the “opacity” of
balance sheets.
o Maximum Possible Work
We will now ask the question what is the maximum of work possible of an economic sys
tem. For this we look at a large number of economic systems which are in total much lar
ger than the differential economic system WS
1
with the condition that x = Ei, Fig.6:
E WS
i
>> WS
1
<< WS
x
(3.102)
All systems are located in an isolated control room. Therefore we have no outside ex
change of physical or nonphysical energies over the system boundaries. The conservation
of energy according to the first law is fulfilled at any time. Under these conditions we can
say that differential changes in the differential system WS
1
can be neglected as they have
no influence on WS
X
.
Isolated Control Room
Fig. 6
Furthermore we have to assume that the system WS
1
is not in a state of equilibrium with
WS
x
. Otherwise the whole control room would be in equilibrium and nothing could happen
anymore according to the second law of ecodynamics.
The inner energy of the total system WS
X
at the start of the processes within WS
1
is u
A
and
at the end of this processes u
E
. According to the first law the total work done at the end of
the processes will be
L
tot.
= u
E
 u
A
= A u
tot..
(3.103)
WS
x
= E WS
i
>> WS
1
dw
dq
WS
1
59
For the production of a product by the economic system WS
1
we need the physical ener
gies dq and the nonphysical energies dw. This we take out of the infinite large reservoir
WS
X
. On the other hand we might assume that dw is an advanced payment of WS
X
to
achieve the necessary work of the people within the system WS
1
.
At the end of the process the product dq
p
is delivered to WS
X
, i.e. WS
X
receives the total
work
L
tot.
= dq
p
(3.104)
According to the first law it must be that:
dq + dw = du
E
 du
A
(3.105)
It follows then
L
tot.
= dq
p
= dq + dw (3.106)
For the produced entropy within the system WS
1
we obtain:
k  dq
p
= A s = (ds
E1
 ds
A1
) > 0 (3.107)
where ds
E1
and ds
A1
are the entropy values of the system WS
1
, which must correspond to
the entropy change of the total system WS
X
.
For the entropy balance of the system WS
X
it follows
A s
EA
= k  (dq
p
– dq) (3.108)
A s
EA
= k  (dq + dw) – dq (3.109)
A s
EA
= k  dw (3.110)
This means that the work of all systems within the control room depend solely on the work
the initial and final state of the system WS
1
and the nonphysical energy w supplied by
WS
X
. The maximum of work will therefore be achieved when WS
X
and WS
1
arrive at
equilibrium. This important result says that the maximum total work possible of WS
1
de
pends on the ecodynamic conditions of all economic systems in the control room.
We can draw the following general conclusion: In an isolated or quasiisolated larger eco
nomic system like the domestic economy the total work possible or the performance or the
productive capacity of an economic system in this control room depends on the perform
ance of all other economic system in this control room. Simply said: If many of the sys
tems in the control room are in difficulties the rest of the economic system probably will
have trouble, too.
Further: As it follows by our study that the quantity “k” is a constant we must come to
the conclusion that the maximum performance of a subsystem of a group of larger eco
nomic systems, for instance a section of the department of revenue, depends on the general
energy level of this larger economic system. The performance can only be changed by a
change of the quality of the quantity energy w. By no means however this statement may
60
be mistaken or mixed up with salary or wage increases as such. What is meant here is en
ergetic quality not quantity!
With these remarks we close the quantitative derivations of the first and second law of e
codynamics. We have shown that both thermodynamically based laws can be applied for
investigating economical developments and therefore in the science of economy. In the
next chapters we will treat further details of both laws in ecodynamics. Because all eco
nomic processes can be assumed isothermal, isobar and isochore this further treatment is
very much facilitated. The treatment of the ecodynamics of binary systems in chapter 5
may put a little bit of strain upon the reader. However, as a reward he will find some inter
esting results.
As a minor point we like to mention once more that we have not included in our deriva
tions the sate functions C and c, i.e. the capital flow of an economic system. The only rea
son for this was to facilitate our derivations. The inclusions of these state functions will not
change our results and conclusions.
61
3.3. The Second Law of Ecodynamics
3.3.5 Exergy, Anergy and the Second Law
In chapter 3.2.1 we have introduced the terms exergy and anergy as convenient terms for a
better understanding of the laws of ecodynamics. Now we will ask the question how we
have to define the exergy (E, e) and anergy (A, a) in connection with ecodynamic proc
esses based on the second law of ecodynamics. In this case it is not necessary to use inten
sive quantities we shall therefore use extensive quantities in this chapter.
The inner energy of an economic system shall be in the basic state of the system U
0
. Ac
cording to the second law the inner energy of in economic system in its original condition
cannot be used as such i.e. we have to consider this energy as anergy.
U
0
= A
0
(3.111)
Starting a process to manufacture a product Q
2
we must purchase the primary material Q
1
,
which is energy wise anergetic and we must supply the exergetic energy W
1
as well as the
energy V
irr.
= Q
irr.
+ W
irr.
to cover the energy losses by scrap, waste etc. during the produc
tion process. The inner energy of the economic system will be than
U
1
= U
0
+ Q
1
+ W
1
+ V
irr
(3.112)
or
U
1
= U
0
+ Q
2
+ V
irr
(3.113)
These equations say that there will be the production of Q
2
as well as the coverage of the
system losses. After the sale of the product Q
2
the economic system will be back in its
original state U
0
. The difference of the inner energy after production and before the sales is
U
1
 U
0
= Q
1
+ W
1
+ V
irr
(3.114)
A U = Q
2
+ V
irr
(3.115)
A U = A A (3.116)
The total difference of the inner energy of the economic system before and after a process
there fore is only Anergy.
For the used exergy during the process we can write
E = A U – Q
1
– V
irr
(3.117)
or
E = W
1
+ V
irr
(3.118)
At the end of the process all the exergy W1 is transferred in the anergy A
W1
after being
used for the production of Q
1
and for covering the losses V
irr.
We can define:
 Anergy at the beginning of the process A
0
= U
0
and AQ
1
62
With AQ
1
by acquiring as primary product Q
1
 Anergy development during the process A
W1
und A
Virr
by the use of W
1
for making the product and of A
Virr
for covering the losses
 Anergy after the end of the process A
E
= A
Uo
+ A
Q1
+ A A
 Anergy increase during the process A A = A
W1
+ A
Virr
This balance shows that an ecodynamic process principally results in the generation of An
ergy. This has as consequence an increase of the entropy of the economic system or the
control room or finally of the system earth.
AS = k  (A
W1
+ A
Virr
) ( 3.119)
AS
Process
= E
Process
= the supplied exergy (3.120)
General Consequences:
An economic system has to use the exergy W, w to produce with the anergy Q, q as pri
mary material a new product Q
P
, q
p
whereby the exergy W, w is transferred in anergy.
As well as the economic system acquired the primary material as anergy it sells or transfers
its product Q
P
, q
p
as anergy to another economic system. In this sense even a single person
is this final economic system.
In addition to these uses of exergy we have to consider the sometimes considerably large
losses of processes, which will be totally a transfer of exergy into anergy.
An economic system as such has in it basic state
U
0
= Q
0
+ W
0
(3.121)
no exergy content. The inner energy U
0
cannot deliver any work through the system
boundaries of the economic system. This is only possible after an input of exergetic W –
energies crossing the system boundaries.
We have to point out however that everything we said here does apply in this rather simple
form only for ecodynamic processes. Thermodynamic processes have much more compli
cated exergy / anergy relations because of their dependencies on temperature and other
thermodynamic parameters. Therefore one has strictly to distinguish between thermody
namic and ecodynamic processes. Both have to be dealt with entirely separated.
Of very large importance is the use of energy of the not renewable primary fossil energies
coal, oil and gas in ecodynamic processes. The permanent change of the exergy of these
primary resources into anergy results in an irrevocable destruction of the limited exergy of
our nature. Furthermore we should not lose sight that even the usage of the renewable ex
ergy of our sun and the wind will result in anergy, which might have serious consequences,
too. For this we mention just two examples only:
63
For a large scale application of solar energy there are plans discussed since a long time to
use the Sahara Desert with its very high input on solar radiation to transfer this radiation
into electrical power. Beside very many other scientific and technical problems to be
solved there is also the question of what happens to the ‘Albedo’ of the desert in North Af
rica? With the amount the radiation used to produce electrical currant we have to take into
account that not only every watt of energy produced will be transferred into Anergy some
where but that simultaneously we reduce the albedo, i.e. the equilibrium between incoming
and reflected radiation energy. This will result in a change of the air current over the desert
with so far unknown effects on the trade winds! That this would be without (negative) in
fluence on the total climate of our earth is almost unrealistic to believe. This might be
much more dangerous than the high production of anergy of the electrical currant with
overall very low efficiency anyway.
The increasing use of the wind energy raises another question. The reduction of the energy
of the wind by each wind converter is about double as high as the production of electrical
power of each wind converter. This is given by the physical laws and we therefore produce
a large amount of Anergy with this technology too. Nobody to our knowledge knows if
there will be effects on the climate if we reduce the energy of the wind in large areas and
about hundred meters above the surface of our earth. What happens when the areas of wind
parks increase more and more? Probably nobody knows. It might however be worth to
think about it, couldn’t be a mistake anyway.
The most important consequence of the above discussion on exergy and anergy however is
the recognition that all economic processes in our world result in a production of anergy of
the same amount we use as total exergy. This reminds indirectly of the picture of a man sit
ting with a saw on a bough not knowing on which side he should start using the saw.
64
3.4 The Properties of the Constant 
With the quantitative treatment of the second law, we have already pointed out that the
constant  is very important in ecodynamics. For instance, we have seen that two thermo
dynamic systems are in equilibrium with each other if we can describe them with the same
value of . In case two system which are each for themselves in an state of equilibrium but
have a different values of  are brought into contact then both system will move toward a
new state of equilibrium with the same value of  and therefore an equilibrium state which
is equivalent for both systems. Now we have to find out if this is a law that applies gener
ally to the ecodynamic, too.
In thermodynamics, the quantity  is a function of the inner energy of a system with the
consequence that systems with different values of  in contact with each other will ex
change heat energy. Different  values mean in thermodynamics that systems have differ
ent temperatures. We can write
kT
1
=  (3.122)
The indications are that economic systems have globally wide the same temperature and
that this temperature is at least quasi constant. If this is true, we have to draw the conclu
sion that  must be constant, too. There are no indications that there is an exchange of heat
energy between economic systems being in contact. If we find on the other hand in our in
vestigation that for economic system  has always the same value we can say that ecody
namically the environment of all economic system is isothermal.
In the following, we look at the behaviour of two economic systems A and B, which are in
nonadiabatic contact and can therefore exchange q energies. As these q energies in general
are very small as compared with the total inner energy of economic systems, we assume
that a very small quantity of q of the small system B is exchanged into a very large system
A. The result will be that the change if the inner energy of A is small as compared to the
total inner energy of A:
q << u
A
>> A u
A
(3.123)
We know already that the number of the states of energy is proportional with number de
grees of freedom of an economic system, equation 3.71
O = prop. (u
A
)
F
(3.71)
We can write therefore
ln O ~ F ln (u
A
) + const. (3.124)
Using equation 4.86
u
1
u
ln
o
O o
O
=
o
O o
=  (3.86)
65
we arrive at
A
u
F
u
ln
~
o
O o
=  (3.125)
Differentiating this equation with respect to u we obtain
( )
2
A
u
F
u
÷ ~
o
o
(3.126)
We have said that q is very small as compared with the inner energy of the system A.
This has as a consequence that  will change only by an infinitesimal amount, which we
can neglect. With the equations 3.123 and 3.71 we arrive in a first approximation at
q
u
q
u
F
q
u
2

÷ ~ ÷ ~
o
o
=  A (3.127)
q
u o
o
~  A (3.128)
i.e. together with the unbalanced equation 3.123 it follows that
=  A
<<  (3.129)
But this means that  is constant in a first approximation.
The same result we arrive at by the following observation. The inner energy of the eco
nomic system A has changed adding the small amount of q from u to u + q. Therefore we
have a change in the number of states of the system A accordingly. With the help of the
Tailor’s series we find for the change in the number of states:
A ln O = ln O (u + q) – ln O(u)
A ...... q
u
ln
2
1
q
u
ln
ln
2
2
2
+
o
O o
+
o
O o
= O (3.130)
A ....... q
u 2
1
q ln
2
+
o
o
+  = O
It follows that with very small quantities of q the value of  does practically not change.
Therefore we can neglect the termo/ou because of 4.128 an arrive at
q
u o
o O
= O A
ln
ln =  q (3.131)
66
The transfers of q from the economic system B to the economic system A results in a
change of the Entropy by
s = k ln O (3.90)
s = k  q (3.94)
with a constant value of .
Considering the equations 3.123 and 3.24 we can say that the above treatment is also valid
with larger values of q. We obtain than generally
ds = k  oq (3.132)
an equation we know already from equation 3.70.
Our derivation shows that we can very well say that the value of  is a constant in ecody
namics in first approximation. We derive therfore at the important conclusion that in eco
dynamics we have globally an isothermal behaviour of all economic systems. But it is very
important that we realize that the isothermal behaviour of economic systems must not be
mixed up with the behaviour of thermodynamic systems, which are by no means isother
mal in general. Therefore the treatment of thermodynamic processes in economic systems
must be entirely separated from ecodynamic processes.
We found that according to equation 3.125 the value of  is reversible proportional to the
mean inner energy of an economic system per degree of freedom, so we can write:
F
) u u (
0
1
÷
= 
÷
(3.133)
If we now look at the equation of the thermodynamics

1
= k T (3.69)
we can conclude that for each ecodynamic system at a temperature of T = 0 [K] (i.e. the
absolute zero point of temperature) a basic state of the lowest possible inner energy u
0
is
reached where  will be infinite. Therefore we have in thermodynamics a lowest possible
temperature but no upper limit for the temperature as our knowledge and experience
shows.
The existence of physical systems therefore has a lowest boundary value of temperature
but no upper one. In our cosmic physical world we know of temperatures of 10
x
billions
[K].
Within this extreme range of cosmic world temperatures we look at the range of existence
of economic systems only as a very tiny differential range. We have to consider that even
on the biological basis of our life the temperature range of our possible existence is just a
very small one only. The differential temperature range of our existence we may assume
around a temperature of 25 C° = 298, 15 [K].
67
The value for  follows than as a constant with this temperature of 25 [C°], which is the
standard room temperature according to the international SIS rules.
Based upon this we obtain for
 =
kT
1
(3.69)
together with the BoltzmannConstant of 1,38 x 10
23
[Joule x Kelvin
1
], for  the value
ß ~ 2,43 x 10
20
[Joule
1
] (3.134)
For the entropy we arrive with
ds
T
dq
= (3.68)
and equation (3.134) at the definition equation of the entropy in ecodynamics
ds = k  dq [Joule] (3.70)
As it must be, in ecodynamics the Entropy is like in the thermodynamics an energy. For a
finite economic system we have to use the extensive writing
S = k  Q (3.135)
Or by combining k  to a constant K
S = K Q [Joule] (3.136)
with K ~ 3,35 x 10
3
(3.137)
where K has no dimensions.
For the inner energy of economic systems per degree of freedom we obtain (using equation
3.131)
u
f
~ 4 x 10
21
[Joule] (3.138)
How large the number of the degrees of freedom actually can be, we will demonstrate
theoretically on the basis that for every action sequence two degrees of freedom f = 2 are
possible namely “yes” or “no”. With the basic equation
E f = 2
N
(3.139)
it follows for various figures of N of action sequences
N = 10 E f = 1,0 x 10
3
N = 37 E f = 1,4 x 10
10
N = 100 E f = 1,3 x 10
30
68
The degrees of freedom can become extremely high values. In the example we talked
about in chapter 3.3.3 we assumed 20 workers at 50 different workstations with 2 boxes of
material at each station resulted in a number of “particles” N = 170. It follows that even
this small economic system has a sum of 1.5 x 10
51
degrees of freedom, an unbelievable
high figure.
This result we must not put in a direct relation to the inner energy of an economic system.
We must consider that very many yes/no degrees of freedom block each other, side pa
rameters exclude many etc., so that the degrees of freedom will be reduced to realistic val
ues. We have further to assume that many of the degrees of freedom are actually not used
and stay idle. May be we can say that they lay fellow. This might be on the other hand a
chance to increase ecodynamic possibilities for solving problems that could not be solved
so far. It could be an interesting task to look into more detail in this direction by determina
tion actual the figures of the degrees of freedom and to classify them. It may be that this
could be a measure for the efficiency of economic systems.
Based on the data developed so far we are also able to connect these data with the theory of
information. According to this theory one bit has the entropy equivalent of
s
bit
= k ln 2 = 0,95 10
23
[Joule] (3.140)
This means that on the basis of our value that one bit has the energy of
q
bit
~ 2,8 10
21
[Joule] (3.141)
Looking at the extreme large numbers of bits moving around the world it becomes very
obvious that the energy (exergy) used for the bit production and therefore the transfer in
anergy cannot be neglected.
o The Energy of a Worker in an Economic System
We will now have a look at the connection of the mean basic energy of man working in an
economic system and the quantity .
Based upon the BoltzmannFactor the probability that a worker has a certain state of exci
tation is given by the canonical equation
i
Ce P
i
c ÷
= (3.142)
Here we assume that the positive or negative influence between the workers is to be ne
glectable (if this is conform with the reality may certainly be questioned). By the quantum
theoretical treatment it follows that the basic energy c of a worker in an economic system
will be
o
o
= c
Z ln
(3.143)
69
where Z is the socalled ‘State Sum of the Workers’ in a system given by the quantum the
ory as
b ln 3 ln
2
3
V ln Z ln +  ÷ = (3.144)
In combination with equation 3.128 we obtain as mean energy c for a worker in an eco
nomical system

= c
1
2
3
(3.145)
According to this result the mean basic energy of a worker in a system depends only on the
constant . The Volume V and the mass b can be neglected in this treatment. Because
workers in an economic system in general need the same, i.e. constant temperature we
have a further argument for the constant temperature of economic systems and therefore a
constant .
If we say that E
o
is the basic inner energy per worker than we can say that the Inner Energy
of a system is given by
E
No
= N c (3.146)
Where we have
c s w
L
(3.147)
with w
L
being the value for wages or salaries. This means that the effective usable energy
of a worker in a system is a function of the nonphysical energy w. The value added is
therefore proportional to the monetary payments.
The same results as above we will obtain by the following thoughts. During the quantita
tive treatment of the first law we arrived by using a vectorial treatment at the result that all
forces within a system will neutralize each other so that we have no outside effects. This
however does not mean that these mass particles are stationary or resting. Using the kinetic
theory of gases we can define a mean scalar velocity of the particles
2
z
2
y
2
x
2
c c c c + + = (3.148)
with c as the velocity in the room coordinates x, y, und z. With the help of the total impulse
of the particles in one direction (room axis) we obtain for this impulse of all particle in this
direction
I = K t = nFt c m
3
1
2
(3.149)
Where F is the cross section of the considered volume and t the time. With introducing a
pressure p = K/F we arrive at
p v = 1/3 N
A
m c
2
(3.150)
Using now the basic thermal state equation of thermodynamics
70
p V = R T (3.151)
and the relation of the Gas Constant R with the Boltzmann Constant and the Avogadro
Constant N
A
R =
A
N
k
(3.152)
we arrive finally at the equation for the kinetic energy of a worker in an economic system
as
u
w
= c =

1
2
3
(3.145)
That is the same result we had already using quite a different derivation.
Finally we have to stress one point: In this study we came to the result that the energy of
the working people in an economic system is proportional to 1/ and also a function of the
nonphysical energy w. We shall not treat this question further in this study although it
seems to be very interesting.
71
4. Free Energy of Economic Systems
The concept of ‘Free Energy’ plays a very important role in thermodynamics. We first
must clarify what we have to understand by this state function of free energy in ecodynam
ics before we can ask what is the influence of the free energy on economic processes. Our
further basis is that all economic processes are isothermal, isobar and isochore as said in
the previous chapters already. On this basis our derivation of the free energy becomes sim
pler.
What is free energy? The free energy of an economic system tells us if a process can pro
ceed at all or would not be possible or cannot start. The free energy is that part of the avail
able energy which can be transformed with (reversible) processes in any other form of en
ergy as for instance work. There are various mathematicalphysical ways to define and to
derive at the free energy. We shall follow here the concept of the so called ‘Unbalanced
Equation of Clausius’ as this way can be directly combined with processes in economic
systems.
If we look at an economic system which is enclosed in a surrounding control room like an
isolated environment, than we know that every change of state in this economic system
will result in a change of the entropy ds of this system as well as of the entropy ds’ of the
control room. We know further that all ecodynamic processes are irreversible and that the
entropy therefore must increase. Therefore we have
ds  ds’ > 0 (4.1)
or
ds > ds’ (4.2)
(The equality sign is valid only for the case of reversibility)
With our known equation
ds’ = k  dq (4.3)
we arrive at the unbalanced equation of Clausius
ds >
T
dq
(4.4)
or
ds > k  dq (4.5)
If we set dw now as zero, dw = 0, than we can write with the first law of ecodynamics
with dq = du also
ds  k  du > 0 (4.6)
All three equations 4.4 to 4.6 are different writings only of the Clausius equation. They ac
tually tell us the conditions under which we can observe voluntary changes of states of a
system depending on the state functions of this system. We now look at two different
cases:
72
The first case will be a state where
ds
u,w
> 0 (4.7)
with the Inner Energy u and the nonphysical energy w held constant as for instance in an
isolated economic system. In this case the unbalanced equation of Clausius says that the
entropy will increase with a voluntary change of state, as the entropy of the control room
cannot change. This is conform with the second law of ecodynamics.
In the second case we assume
du
s,w
s 0 (4.8)
where the entropy s and the state function w will remain constant. If now the inner energy
decreases with an ecodynamic process the entropy of the control room must increase if the
Entropy of the economic system shall be constant. The increases of entropy in the control
room can but only happen by a transport of qenergies over the system boundaries into the
control room.
We can also say: The entropy of an isolated economic system must increase if the Inner
Energy remains constant. The exchange of entropy with the control room is not possible.
On the other hand the inner energy must decrease if the entropy of the economic system
shall remain constant with the consequence of an increase of the entropy of the control
room.
Based upon these general thoughts we are able to define a further thermodynamic and eco
dynamic state function, the so called ‘Helmholtz function of the Free Energy f:
f = u 
 k
1
s (4.9)
(Remark: In thermodynamics one defines parallel the state function of the ‘Free Enthalpy’,
also called the ‘Gibbs Function’. Because of our isothermal, isobar and isochor ecody
namic conditions this function is of no interest to us as it will transfer automatically in the
Free Energy when applied to ecodynamic questions.)
All quantities in equation 4.9 are principally related to the considered economic system.
What does this equation tell us?
If we have a change of state in an economic system as for instance by a production process
we observe with a differential treatment of this process a change of the free energy as fol
lows
df = du 
 k
1
ds (4.10)
or looking at a real process we could write also
Af = Au 
 k
1
As (4.11)
73
The criterion of a voluntary change of state will be than
df s 0 (4.12)
This unbalanced equation is decisive for the start of voluntary economic processes. These
processes will only proceed voluntary if they are combined with a decrease of free energy.
The system always move in the direction of decreasing free energy, equilibrium is reached
if df = 0.
Economic systems always tend towards states with reducing free energy because only than
entropy can increase. An economic system and its surrounding “suffer” an increase of en
tropy as the result of an voluntary change of state where the free energy goes toward zero.
The result of this is very clearly that the sum of the entropy of an economic system and its
environment will be maximized.
The free energy represents therefore the maximum of work an economic system can de
liver
w
max
= Af (4.13)
The theoretical maximum of work can only be achieved with reversible changes of states.
Then we have
dw
max
= du 
 k
1
ds (4.14)
or
w
max
= Au 
 k
1
As = Af (4.15)
and therefore
dw
max
= df (4.16)
As all economic processes are irreversible it follows that for all these processes we never
have the whole Inner Energy avaible for work to do. We can formulate:
 The free energy is a measure of that part of inner energy which is
available for work.
Example: If the entropy of an economic system decreases during the change of a state, i.e.
if we have
 k
1
As < 0 (4.17)
there will always be a transfer of physical energy, like a product, over the system bounda
ries of this economic system. If we have on the other hand
 k
1
As> 0 (4.18)
than we observe an energy transfer (entropy) into the economic system, for instance the
purchase of raw material by the purchasing department. – Only with these conditions an
economic process can be initiated.
74
In case that the necessary free energy is not large enough to supply the required maximum
work it is necessary to transfer the difference of free energy from the outside of the eco
nomic system, the contol room or other economic systems.
With the basic equations of the first and second law and the equation for the free energy
du = dq + dw
ds = k  dq (4.19)
df = du – Kds
we come to the result
f = w (4.20)
This important result says that in ecodynamics the free energy and value added are syn
onymous terms. This observation applies to single economic systems as well as to binary
systems or multiple systems. In ecodynamic systems one can always write the quantity w
instead of the quantity f for the free energy or vice versa. This depends on the questions to
be solved i.e. if we do want to know what free energy is available or if we do need to have
the value added for our calculations. If we however want to judge over the fusion of eco
nomic systems (Chapter 5) we are generally interested in the available free energy we will
gain or loose through the fusion process.
One of our findings by working with the two laws of thermodynamic was the fact that an
isolated economic system has no chance to survive. The same result we have obtained by
our treating with the free energy of economic systems.
At the beginning of this chapter we said that there are various possibilities of derivations of
the free energy. One other way would be with the mathematical aid of the ‘Legendre
Transformation’ on the inner energy. Another way starts with the methods of statistical
physics. As one can say, there are many ways leading to Rome.
All these derivation end up with the equation
df = du 
 k
1
ds (4.10)
which means that the economic system of highest probability is the one with the lowest
free energy.
75
5. Ecodynamic of Binary Economic Systems
5.1 Basics
About 1954/55 Prof. Dr. Willy Oelsen developed his ‘Thermodynamic Analysis for Binary
Alloys’ at the Technical University, Clausthal. In the years before he very often evolved
his thoughts during his lectures without a second of breathtaking while his students could
just only listened because making notes was almost impossible. During one of these lec
tures he wrote the following equation on the blackboard:
Gx,T = H
x.T
 T S
x,T
= (1x) (H
A,T
– T S
A,T
+ RT ln a
A,X,T
) + x (H
B,T
– T S
B,T
+ RT lna
B,x,T
) (5.1)
At that point, I think, we all had lost ground and were just absorbed by listening. This is
the equation upon which W. Oelsen founded the ‘Thermodynamic Analysis of Binary Al
loys of Metals’. It was this equation I remembered thinking about the application of ther
modynamic laws in economy and only 48 years after I saw this equation the first time I
slowly began to realize what was behind this analysis of my teacher Prof. Oelsen.
The equation 7.1 combines the free enthalpy, that is the thermodynamical or the Gibbs Po
tential, of a homogeneous compound with the free enthalpy of the both pure components.
The quantities a
A,x
and a
B,x
are the activities of the components in a binary system. They
are a measure of the reciprocal affect of the components within the compound. We define
these activities here as the reciprocal affects of two economic systems after a merger of
these systems.
In an ideal compound the activities will become a
A,x
= x
A
= (1 x) and a
B,x
= x
B
= x .
The quantities x
A
and x
B
are the portions of the components A and B in the compound
with always x
A
+ x
B
= 1. With normal actual compounds the activities are always a
A,x
=
x
A
and a
B,x
= x
B
. The less one likes each other, the smaller become the a  values as com
pared with the x  values.
W. Oelsen showed at that time also that the equation 5.1 is independent of the state of ag
gregate and can be applied to multiple systems as well. These were the basic thoughts to
transfer the basic thinking of W. Oelsen into the ecodynamics.
It is now very important and decisive that in ecodynamics we have isothermal, isobar and
isochore conditions, as we have seen in the foregoing chapters. On this basis we are able to
write the equation (5.1) for the application in ecodynamics as follows:
f
x
= u
x
– K s
x
= (1 – x) (u
A
– K s
A
+ K’ ln a
A,x
) + x ( u
B
– K s
B
+ K’ ln a
B,x
) (5.2)
with: K =
 k
1
, K’ =

N
and R = k N, where N represents the so called Avogadro
Constant, R the Universal Gas Constant, k the Boltzmann Constant and  our Ecodynami
cal Constant.
This equation is generally valid for homogeneous as well as heterogeneous binary system
as in our case of two economic systems A and B, which are combined with each other by a
76
merger process. In an ideal case we would have a
A
= x
A
and a
B
= x
B
, which means that
the activities are equal to the real share of A and B in the binary system, i.e. x
A
= 1 – x
B
and x
B
= x
B
.
For the inner energy u
x
of a binary economic system we arrive with equation 5.2 at
u
x
= (1x) ( u
Ax
+ R ln a
Ax
) + x (u
Bx
+ R ln a
Bx
) (5.3)
For the ‘Free Energy of Mixing’, that is the free energy of the binary economic system of
the components A and B according to chapter 4, we arrive at
A
M
f
x
= K’ [ (1 – x) ln a
Ax
+ x ln a
Bx
] (5.4)
This free energy of mixing A
M
f
x
is the sum of the partial free energies (Af
A
)
x
and (Af
B
)
x
of the components A and B of the binary system:
(Af
A
)
x
= A
M
f
x
 (1 – x)
x
f
x M
o
A o
= K’ (1 – x) ln a
Ax
(5.5)
(Af
B
)
x
= A
M
f
x
 x
x
f
x M
o
A o
= K’ x ln a
Bx
(5.6)
(To avoid any misunderstanding these equations apply only under ecodynamic conditions
but not under thermodynamic conditions with temperature, volume and pressure depend
encies!)
On the basis of these equations we will investigate in detail questions of the inner energy,
the entropy, the free energy and of the energies of mixing of binary ecodynamic systems.
The equations we use will not be deduced from their basic thermodynamic equations. For
this the reader will find the details in the thermodynamic literature.
As in the foregoing chapters we work here with intensive quantities being able this way to
formulate general valid mathematical interrelationships. In the following we will give
some definitions of intensive state functions as used here for treating questions of merger:
u
x
= The ‘Inner Energy’ of a binary economic system of the composition x
x
A
, x
B
= the share of the economic systems A und B with the merged system C with
the conditions
x
A
+ x
B
= 1 or x
B
= (1  x
A
) or x
A
= (1  x
B
) (5.7)
s
x
= The ‘Entropy’ of a binary economic system with
s
x
= x
A
s
A
+ x
B
s
B
(5.8)
f
x
= The ‘Free Energy’ of a binary economic system with
f
x
= x
A
f
A
+ x
B
f
B
(5.9)
In merging processes we have to consider the very important „Mixing“Energies, which
originate during the merging process. We have to distinguish:
77
A
M
u
x
= ‘Inner Energy of Mixing’ of an economic system of the composition x
A
M
s
x
= ‘Entropy of Mixing’ of an economic system of the composition x
A
M
f
x
= ‘Free Energy of Mixing’ of an economic system of the composition x
These quantities are always composed of the corresponding partial quantities as for in
stance for the free energy of mixing
A
M
f
x
= f
x
 [x
A
(Af
A
)
x
+ x
B
(Af
B
)] (5.10)
For the partial quantities and the inner energy and the entropy we apply the same method
of writing. In the appendix the reader will find a complete listing of all signs we are using.
We have to admit that the used nomenclature looks somewhat complicated. But we have
used the modern and internationally accepted (?) nomenclature of thermodynamics. Unfor
tunately the reader will find in textbooks on thermodynamic various different writings, es
pecially in older editions. This can sometimes be rather confusing. Not to increase this
confusion the author decided to apply the international nomenclature (but somewhat half
hearted).
78
5. Ecodynamics of Binary Economic Systems
5.2 The Inner Energy of Binary Economic Systems
In the ideal case of the merger of two economic systems A and B the inner energy of the
merged system will be
u
x,id
. = (1 – x) u
A
+ x u
B
(5.11)
In this equation u
A
represents the original inner energy of the economic system A as u
B
the
inner energy for the system B. This equation represents only a theoretical value of the inner
energy of the merged economic system and serves only as a starting base for the following
treatment.
We have learned that all ecodynamic processes are irreversible. This must apply for the
“mixing” of two economic systems during a merging process, too. Such merging process is
principally endoenergetic, i.e. the process needs an energy (money) supply for its originat
ing and processing. This fact will probably not be denied by anybody. Therefore we need
for any merger ‘energy of mixing’ or as we call it the ‘Inner Energy of Mixing’ which has
to be supplied as exergy and will finally be useless anergy.
We will now look at the correlations to learn what the actual development of the inner en
ergy will be and how it depends on the composition of the both merging economic systems
A and B after merging.
For this we see Fig. 8 :
u
A
u
B
u
B,id
(Au
B
)
x1
(A
M
u
B
)
x1
A
M
u
x1
u
x,id
real
u
A,id.
u
x1id
(A
M
u
A
)
x1
u
x1real .
(Au
A
)
x1
A x x
1
B
Inner Energy of a binary economic system
Fig. 8 after merger
79
On the ordinate we have marked the inner energies u
A
and u
B
of both original economic
systems A and B. In case of the theoretical and ideal development of the Inner Energy of
the merged system according equation 11 we obtain the straight line between the points
u
A,id.
and u
B,id.
.
Depending on the problems which develop with the merger of the two companies the ap
plication of an inner energy of mixing A
M
u
x
is required to initiate the merger and to get it
processing. The necessary amount of money (energy) depends naturally on the specific
case and its problems. A hostile take over certainly needs more exergy to get on its way
than a friendly one. But even a friendly merger may need large amounts of exergy depend
ing on the state of the economic systems A and B and for necessary measures to be taken
as for instance for over aged machinery, the cost of the redundancy schemes, necessary
credits to pay off debts just to name a few costs only which have to be considered.
For the total expenditures of the inner energy of mixing we arrive at the energy curve u
xreal
in Fig. 8 with the index ‘real’. This curve connects the original values u
A,id.
und u
B,id.
, too.
The shape of this curve depends very strongly on the strength of each of the partners as can
be seen for instance by a comparison with the corresponding curve in Fig. 9. It becomes
very clear how important are careful analyses to find out what inner energies of mixing are
necessary and how they depend on the shares of the economic systems in the merged sys
tem.
For a certain relation of the shares of A and B in the merged system we obtain the partial
components of the inner energies (Au
A
)
x
and (Au
B
)
x
by constructing the tangent line at the
point x of the real curve for the Inner Energy of Mixing. The real inner energy of mixing
for the shares at x for the economic systems A and d B are than given by
(A
M
u)
x
= u
x,id
 u
x,real
(5.12)
A
M
u
x
= (1 – x) [u
A,id
 (Au
A
)
x
] + x [u
B,id
 (Au
B
)
x
] (5.13)
A
M
u
x
= (1–x) (A
M
u
A
)
x
+ x (A
M
u
B
)
x
(5.14)
The quantities (A
M
u
A
)
x
and (A
M
u
B
)
x
are the partial inner energies of mixing of the eco
nomic systems A and B with the share (1  x) for A and x for B.
It is important and rather decisive for the way of going on with the merger procedures or
even a break off that the inner energy of mixing of the new merged economic system u
x,real
is in any case lower than the ideal inner energy of mixing u
X,id
. The resulting suspension
curve can have rather different forms depending on the various influences on the merger
and on the shares of the merging partners. The quantity of A
M
u
x
is finally the measure of
the endoenergetic inner energy of mixing and must be determined for all possible or neces
sary points of various x values.
If we assume that the ‘real’ curve in Fig 8 corresponds to the necessary inner energy of
mixing A
M
u
x
according to the shares of the original systems A and B then we see at the
suspension curve that the value A
M
u
x
reduces the theoretical and ideal value of the new
company. The lower value of the Inner Energy of the merged company is than given by
equations 5.12 to 5.14.
80
Based upon these equations it follows that both participating economic systems have to de
liver their part of energy each. The partial inner energy (Au
A
)
X
multiplied with the factor
(1 – x) is the basic quantity which company A has to supply as its part for the inner energy
of mixing (A
M
u)
x
. The same applies to B respectively.
Depending on the shape of the suspension curve for the inner energy of mixing it might be
that the stronger company (for instance B in Fig. 9) must supply much more energy
(money) than the weaker company A, although A is the reason for the burden upon B. This
possibility is shown as an example in Fig. 9. Such a curve can result in extreme cost bur
dens for B although the profiteer of the merger is company A.
u
A
u
B
u
B,id
u
x,id.
(A
M
u
B
)
x
u
A,id.
real
A
M
u
x
(A
M
u
A
)
x .
(Au
A
)
x
u
xreal
(Au
B
)
x
A x B
x
Inner Energy of a binary economic system
Fig. 9 after merger
This treatment of the inner energy of mixing shows very clearly that it is very advisable to
think on the problematic of mixing companies even before the first steps, which may cost
already a lot of money are initiated. Otherwise the risk to get shipwrecked, for instance
with a globalization project, is not far off.
Beside the mentioned equations we might add the both following equations, which follow
out of the correlations given in the Fig. 8 and 9 without further comment.
(A
M
u
A
)
x
= u
A
 (Au
A
)
x
(5.15)
(A
M
u
B
)
x
= u
B
 (Au
B
)
x
(5.16)
81
5. Ecodynamic of Binary Economic Systems
5.3 Entropy of binary economic systems
The entropy related phenomenon during a merger of two economic systems we will follow
up with the help of Fig. 10.
Entropie
Entropie
(As
B
)
x,real
A(A
M
s
B
)
x
(As
B
)
x,id
(A
M
s
B
)
x,id.
A(A
M
s)
xreal
real
(As
A
)
x,real
A
M
s
x,real
ideal
s
B,id
A(A
M
s
A
)
x
A
M
s
x,id
(As
A
)
x,id
(A
M
s
A
)
x,id
s
Aid
(1x) s
Aid.
+ x s
Bid.
A B
x (1 – x )
Fig. 10 Entropy of binary economic systems
The dotted line between the points of entropy s
A,id.
and s
B,id.
of the both economic systems
A and B represents the ideal entropy values s
x,id
of the merged system depending on the
share of the systems A and B in the merged system with the result
s
x,id.
= (1 – x) s
A,id.
+ x s
B,id.
(5.17)
But this straight line has no importance to us at all. Why? The merger of two economic
systems independent of what type they may be is ecodynamically always irreversible and
must therefore result in an increase of entropy. This fact alone shows how important it is to
look at the development of the entropy of economic processes in this case of the merger of
economic systems.
Under ideal conditions of a merger of two companies A and B we will have an ideal in
crease of the entropy in form of an ideal entropy of mixing A
M
s
x
according to
82
A
M
s
x,id.
=  R [(1 – x) ln (1 – x) + x ln x] (5.18)
This equation follows out of equations 5.1 or 5.2 respectivly in chapter 5.1. In equation
5.18 the quantity (1 – x) defines the portion of the system A and x the portion of the system
B on the merged economic system. The quantity R is a natural constant, the socalled Gas
Constant, which is given by the already known Boltzmann Constant and the Avogadro
Constant. We do not need more to know on this quantity R in this context.
This equation says that in the ideal case we will have a maximum of increase of Entropy
when A and B have a portion of 0.5 each of the merged economic system. In this case the
maximum ideal increase of the Entropy will be + 5,76 [Joule] per unit of the merged sys
tem. The curve of the ideal increase of entropy will be symmetrically between the ideal
points of Entropy s
A,id.
and s
B,id
of the components A and B.
We learned that even in an ideal case, which never can be achieved, a merger is irreversi
ble according to the second law of ecodynamics. It cannot be canceled without an (very)
high additional input of energy (money) leaving additional not repairable damages behind
anyway.
In reality we must apply an additional supply of energy, as we know already that the mix
ing of to economic system is endoenergetic. In the case of entropy we have to supply the
entropy if mixing A
M
s
x,real
as a consequence of the necessary endoenergetic energy for the
inner energy of mixing A
M
u
x
. The real increase of entropy for the merged system will be
then
A
M
s
x,real
= A
M
s
x,id.
+ A(A
M
s
x,real
) (5.19)
This additional increase of entropy A(A
M
s
x,real
) depends on the amount of the real inner en
ergy of mixing. We can write therefore
A
M
s
x,real
= A
M
s
x,id.
+ k  A
M
u
x
(5.20)
We have to observe that the quantity A
M
s
x,id
cannot be exchanged by k  A
M
u
x,id
as these
quantities are entirely independent from each other as can be shown by the following ex
ample. In case that two economic systems have the same Inner Energy then we have u
x,id.
=
u
A
= u
B
. But looking at equation 18 we see immediately that the increase of the entropy of
mixing A
M
s
x,id
according to this equation is quite independent from k  A
M
u
x,id
.
Summing up so far: During a merging process we observe an increase of the Entropy,
which combines an uninfluenced ideal component and an additional real component on the
basis of the inner energy of mixing. This additional increase of entropy depends on the
shape of the curve for the quantity A(A
M
s
x
)
real
which is also defined by the A
M
u
x
curve. We
have said ‘also defined’ because any additional energy (money) supply exceeding A
M
u
x
will result in a further increase of entropy. Therefore the shape of the curve for A
M
s
x,real
will not follow the symmetry of the A
M
s
x,id.
Curve.
The generally necessary inner energy of mixing puts a burden on every merger process es
pecially if uncalculated or noncalculatedly energies are not taken care of. Surely it can be
that such energies are later avaible for use somewhere but this does not apply to questions
83
of entropy. Each quantum of exergy that results in an increase of entropy will become an
ergy and therefore is lost for any economic process.
We have found in previous chapters that every value added results in an increase of en
tropy. This means in connection with merger that every value added of merger results in an
increase of entropy with no value that had not been there before. The entropic balance
sheet of the ‘before’ and ‘after’ can only be negative because of the higher entropy for the
‘after’. In this connection one may raise the question if globalization mergers are energeti
cally wise to justify at all? Or are there at least entropic limits for such mergers?
Lets have another look at Fig. 10 starting at the marked correlations and the relative x
values. The necessary ideal values of the partial entropy of mixture of B = (A
M
s
B
)
x,id
is
given by the tangent on the ideal curve of entropy at the point x, which is in this case larger
than the value for A = (A
M
s
A
)
x,id
. The additional real value of the partial entropy of mixing
of B = A(A
M
s
B
)
x
is much lower however than the value A = A(A
M
s
A
)
x
. We learn that it is
possible that the economic system A must invest more exergy than the economic system B
even if its share on the total merged system is smaller than that of B. The higher value of
A(A
M
s
A
)
x
for A as compared with A(A
M
s
B
)
x
for B is responsible for this. This question de
pends on the inclination of the straight line s
A,id
 s
B,id
. In such a case one should check if
such a burden on the economic system A is reasonable and justified with respect to the
goal of the merger. The criterion of the entropy is but only one of the three criterions we
are dealing with here. The other ones are the development of the inner energy and of the
free energy. In addition to the question we are dealing with in this study we have to con
sider for decisions on mergers also questions of general economics and political conse
quences as well as for instance questions of the structure of population and their develop
ment in the context of the world development.
The following self explaining equations on the basis of Fig. 10 show further basic relation
ships of the entropy development in case of binary economic systems.
s
x
= (1 – x) (As
A
)
xreal
+ x (As
B
)
xreal
(Total Entropy) (5.21)
A
M
s
xreal
= s
x
 [(1 – x) s
A
+ x s
B
] (Total Entropy of Mixing at x) (5.22)
(A
M
s
A
)
x,id
=  R ln (1 – x) (Partial Entropy of Mixing of A at x) (5.23)
(A
M
S
B
)
x,id
=  R ln x (Partial Entropy of Mixing of B at x) (5.24)
A(A
M
s
A
)
x
= (A
M
s
A
)
x,real
 (A
M
s
A
)
x,id.
(5.25)
A(A
M
s
A
)
x
= (As
A
)
x,real
 R ln (1 – x) (5.28)
In the case of a real merger it is advisable to prove on the development of the inner energy
and the free energy on the basis of the two laws of ecodynamics if there are other influ
ences on the (negative) development of the entropy and exergy / anergy changes.
84
5. Ecodynamic of binary Economic System
5.4. Free Energy of binary Economic Systems
The treatment of the entropy of binary economic systems showed that even under ideal
conditions the entropy has no linear relation between the both economic systems. The same
is true, as we will see with the free energy. In case of a merger of two economic systems A
and B we obtain the following equations for the free energy of mixing under ideal condi
tions
A
M
f
xid.
= RT [(1 – x) ln(1 x) + x ln x]
(5.27)
A
M
f
xid
= K’[(1 – x) ln(1 x) + x ln x]
Where the constant K’ is equal to R T with R = k N
Normally we have to replace x through the activities a
A
and a
B
. This takes in consideration
that the components of the economic system A and B influence each other in such a way
that the effect in the final economic system C is smaller than the theoretical value (1x) or
x respectively. That means that both partners weaken each other. Equation 6.27 looks than
A
M
f
xreal
= K’[(1 – x) ln a
A,x
+ x ln a
B,x
] (5.28)
In general we have to assume that a
A,x
s 1 and a
B,x
s 1 . The equality sign applies only if
a = (1 – x) or x.
The relations we see in equations 5.27 and 5.28 show that the real curve of the free energy
of mixing is more negative than the ideal curve. In other words
The free energy of mixture (of a merged economic systems) is always lower than
the free energy of each of the original economic systems.
In Fig. 11 we can see very clearly the interrelation between the free energies of a binary
economic system. For the ideal values of the free energy of mixture we obtain for the not
possible ideal case
(A
M
f
x
)
id.
= (1 – x) (A
M
f
A
)
id.
+ x (A
M
f
B
)
id.
(5.29)
with
(A
M
f
A
)
id
= RT ln(1 – x) (5.30)
and
(A
M
f
B
)
id.
= RT ln x (5.31)
In case of x = 0,5 where each economic system A and B have equal shares with the merged
system we obtain with RT = K’ = 2,48 10
3
the maximum value of 1,72 10
3
[Joule] per unit
for the ideal free energy of mixture A
M
f
x,id
.That means when we go over to the extensive
values in real cases that we obtain energy values for the free energy of mixing we have to
take into account for making decisions.
85
Free Energy
Free Energy
f
B
(A
M
f
B
)
x,id.
ideal
A
M
f
x,id.
f
A
(Af
B
)
x,id.
(Af
A
)
x,id.
A
M
f
xreal
real
A(A
M
f
A
)
x
A(A
M
f
x
)
(Af
A
)
x,real
A(A
M
f
B
)
x
(Af
B
)
x,real.
(1–x)f
A
+xf
B
A B
x
Fig. 11
Free Energy of binary Economic System
For the free energy of the binary mixture, of the merged system of A and B, we obtain
f
x
= (1 – x) (Af
A
)
x
+ x (Af
B
)
x
(5.32)
where (Af
A
)
x
and (Af
B
)
x
are the Partial Free Energies of the components in the binary sys
tem of the composition x.
The ideal free energy of mixture we obtain
(A
M
f
x
)
id.
= f
x
 [(1 – x)f
A
+ x f
B
] (5.33)
or
(A
M
f
x
)
id.
= (1 – x) (Af
A
)
x
+ x (Af
B
)
x
(5.34)
Further we can write
(A
M
f
A
)
x,id.
= (Af
A
)
x
 f
A
(5.35)
and
(A
M
f
B
)
x,id.
= (Af
B
)
x
 f
B
(5.36)
So far we have explained the ideal case. In reality the free energy of mixture of binary eco
nomic system changes with applying a
A
und a
B
generally with the absolute value
A(A
M
f
x
) according to the equation
A(A
M
f
x
) = (A
M
f
x
)
real
 (A
M
f
x
)
id.
(5.37)
86
with
(A
M
f
x
)
real
= RT [(1 – x) ln a
Ax
+ x ln a
Bx
] (5.38)
This means that the real free energy of mixture is smaller than the ideal values, the nega
tive increase gets greater. (To remember: With values < 1 the nat. logarithms becomes
negative).
For the partial free energy of mixture of the economic systems A and B we obtain
A(A
M
f
A
)
x
= (A
M
f
A
)
x,real
 (A
M
f
x
)
x,id.
(5.39)
with
(A
M
f
A
)
x,real
= RT ln a
A,x
(5.40)
Analog equations we obtain for B.
We now look at the three state functions free energy, inner energy and entropy with respect
to the resistance of binary economic systems against internal problems. On the basis of the
thermodynamic analysis of W.Oelsen we are able to make the following basic statements,
see also Fig. 12:
A x B
3
4
2
1
f
A
f
B
Fig. 12 Possible Curve shapes of the Free Energy
with merger
o Case Curve 1:
The merger of A and B tends to be stable if
A
M
f
x
= A
M
u
x
 KA
M
s
x
= < 0 (5.41)
or
x 1
a
Ax
÷
< 1 and
x
a
Bx
< 1 (5.42)
87
The interpretation in this case could be: „One is willing to do it together“
o Case Curve 3:
If two economic system merge and it comes out that
A
M
f
x
= A
M
u
x
 K A
M
s
x
= > 0 (5.43)
with
x 1
a
Ax
÷
> 1 and
x
a
Bx
> 1 (5.44)
the interpretation would be that the merged economic system is not very stable.
In this case one could say: „We should better not do it“.
o Ideal case Curve 2:
The activities of the merging economic systems correspond to the effective shares of both
systems in the merged system. One does not interfere with each other, that means
A
M
f
x
= A
M
u
x
 KA
M
s
x
= 0 (5.45)
and
x 1
a
Ax
÷
= 1 and
x
a
Bx
= 1 (5.46)
Both economic systems are in equilibrium with each other. This would be really the ideal
state but a state one will probably never get to. The ecodynamic laws we have treated so
far make this ideal rather unlikely. “The fully ideal marriage between two companies is
highly unlikely”.
o Case Curve 4:
In between the possibilities of curves 1, 2 und 3 there are other constellations as follows
x 1
a
Ax
÷
> 1 and
x
a
Bx
< 1 or reversed
x 1
a
Ax
÷
< 1 and
x
a
Bx
> 1 (5.47)
One of the economic systems (the one with > 1) has the tendency to quit rather than to go
on. There will be “a tough hichack with a high entropy production”. This fight for su
premacy costs a lot of money.
To find out if a merger of the economic system A and B will be a success or may be a dis
aster one has to analyze all dates and relations that result out of the values of the inner en
ergy, the entropy and the free energy and the general application of the laws of ecodynam
ics. Only than it is possible to make reliable statements on the possible results of a merger.
This applies especially in the case of measures of globalization, as there are usually rather
difficult problems to look at. The qualitative and quantitative tools we have described here
88
will deliver the possibility to throw light in that tunnel helping to take measured steps and
to avoid problems, which can be avoided. Some (many?) will remain anyway. The basic
data for the merger analysis are naturally the balance sheets, the profit and loss accounts,
market data, analytical data on the company strength and weaknesses, etc..
89
5. Ecodynamic of binary Economic Systems
5.5 Example of a Merger.
In the following we will calculate a very simple example of the merger of two companies
to obtain some feeling for the possible changes of the values for the inner energy, the en
tropy and the free energy with respect to losses, the costs, etc..
Starting Point
For simplicity we look at two companies P
1
and P
2
of practically the same size, same prod
ucts serving the same markets and merging into a new company N. It certainly makes
sense that these both economic systems think about a merger, as it seems to be obvious that
there will be a good possibility for reduction of cost etc. Details we can skip at this point.
The necessary basic data we take out of the profit and loss account:
Material for Production Q
P1
= Q
P2
84 Mio. Euro / Jahr
Wages and Salaries W
P1
= W
P2
41 Mio. Euro / Jahr
___________________________________
Total Inner Energy U
P1
= U
P2
125 Mio. Euro
Basis value for free energy is the sum of wages and salaries as a very rough assumption.
The influence of social security contributions etc. of about 10 Mio. Euro has not been con
sidered just to get an uncomplicated picture. Furthermore about 45 Mio. Euros of opera
tional expenditures have not been considered either. This position would have to be broken
down to its various positions as to see which position would have to be considered and in
what way. Values of the balance sheets, which could influence the inner energy, have been
skipped here, too. But thinking over these exception it becomes clear that there would be
no change as to the principle of our task.
Further necessary information: The sales volume of both companies is about 200 Mio.
Euro, the balance sheet total equals about 170 Mio Euro, for each company respectively.
Up so far we always strictly used intensive values only. We now have to use extensive val
ues. Therefore we write capital letters.
For the quantitative calculation we need the following basis values of ecodynamics:
1,0 Euro ~ 2,9 x 10
6
[Joule]
K
1
= k  = 3,35 x 10
3
K’ = R T = 2,48 x 10
3
[Joule]
R = 8,3 [Joule]
90
With these data and constants above we calculate the following quantities of the merger of
the both companies:
 The development of the inner energy, i.e. the decrease because of the irreversibility
of the merger process.
 The development of the entropy, i.e. the increase because of the irreversibility of
the merger process
 The development of the free energy of mixing, i.e. the decrease of the available free
energy
1. Inner Energy
We have:
U
P1
= U
P2
= 125 10
6
Euro; U
N
= 250 10
6
Euro,
before we take into account ecodynamically losses of irreversibility and cost reductions of
internal modernizing.
With x = (1 – x) = 0,5 it follow
U
Nid.
= 2 [(1 – x) U
P1
+ x U
P2
]
U
Nid.
= 250 10
6
U
Nrea.
= U
Nid.
 A
M
U
Nid.
A
M
U
Nreal.
= [(1 – x) (AU
N1
)
x
+ x(AU
N2
)
x
]
To solve this equation we assume that each of the two companies needs about 4 % of their
inner energy for the endoenergetic energy to start the whole process. This includes for in
stance valuating of internal data, valuating of tax question, calculation for possible
modernizing etc. etc. This figure can be arrived at very accurately in praxis. We obtain
with our rough assumptions:
A
M
U
Nreal.
=  [0,5 (0,04 x 125) + 0,5 (0,04 x 125)] x 10
6
A
M
U
Nreal.
=  5,0 x 10
6
Euro ( =  1,45 x 10
13
[Joule])
This corresponds to a loss of about 2 % on inner energy of the new company N as com
pared with the companies separated. The more detailed and the better the value for which
we took 4 % would be, the better is the value for A
M
U
Nreal.
one arrives at. This statement
applies naturally especially if the xvalues are different.
In our special case the inner energy of the merged systems will decrease by 5 Mio. Euro to
a total of 245 Mio Euro.
91
2. Entropy
Here we have to distinguish between
1. The not avoidable increase of entropyA
M
S
Nid.
and
2. The real increase of the entropy of mixing A
M
S
Nreal
For A
M
S
Nid
we arrive under the given conditions for the merger at
A
M
s
Nid
=  R [(1 – x) ln x + x ln x]
A
M
s
Nid
=  R [  0,693] = 5,75 [Joule pro Euro]
A
M
S
Nid.
= 5,75 x 250 x 10
6
= 1,44 x 10
9
[Joule]
A
M
S
Nid
= 4,97 x 10
2
Euro
For A
M
S
Nreal.
we have
A
M
S
Nreal.
= A
M
S
Nid.
+ k  A
M
(U
N
)
x
For A
M
(U
N
)
x
we have reached at 1,45 x 10
13
[Joule]. Therefore it follows:
A
M
S
Nreal.
= 4,97 x 10
2
+ K
1
1,45 x 10
13
A
M
S
Nreal.
= 4,97 x 10
2
+ 3,35 x 10
3
x 1,45 x 10
13
A
M
S
Nreal.
= 4,86 x 10
10
[Joule]
A
M
S
Nreal.
= 1,68 x 10
4
Euro
We arrive at the result that the merger of the two companies under the given conditions
will result in an increase of the entropy of about 16.800, Euro. This certainly is not a very
high value but it shows that this merger is irreversible. Because of the factor K
1
the increase in entropy will be always below the value for A
M
(U
N
)
x.
3. Free Energy
The ideal free energy of mixing in case of this 50:50 merger of P
1
und P
2
will be
A
M
f
Nxid
= K’ [  0,693]
92
A
M
f
Nxid
=  2,48 x 10
3
x 0,693
A
M
f
Nxid
=  1,72 x 10
3
Joule pro Euro,
With the rough assumption of a free energy in the range of the total amount of the wages
and salaries as total possible added value it follows for A
M
F
Nxid
:
A
M
F
Nxid
= 1,41 x 10
11
[Joule]
A
M
F
Nxid
= 0,49 x 10
5
Euro
To calculate A
M
F
Nxreal
we assume that the activities of both companies are the same, a
P1x
=
a
P2x
. If we furthermore assume that the activities of the both companies will be about 10
per cent less in the merged company than their ideal value we may say that this is a rather
good value. For A
M
F
Nxreal
we obtain under these assumptions the following calculation:
A
M
f
Nxreal
= K’ [(1 – x) ln a
N1x
+ x ln a
N2x
]
with a
N1x
= a
N2x
= 0,9 x it follows
A
M
f
Nxreal
= K’ [(1 – x) ln 0,45 + x ln 0,45]
A
M
f
Nxreal
=  1,98 x 10
3
Joule pro Euro
A
M
F
Nxreal
=  1,62 x 10
11
[Joule]
A
M
F
Nxreal
=  0,56 x 10
5
Euro
The losses of free energy of mixing amounts to about 56.000, Euro.
Summarizing:
For the total energy change of the merger of the two companies P
N1
und P
N2
into the new
company N we arrive the following results:
The decrease of inner energy amounts to
A
M
U
Nxreal
= 5,0 Mio Euro
The entropy increases by
A
M
S
Nxreal
= 16.800, Euro
The free energy is reduced by
A
M
F
Nxreal
= 56.000, Euro
93
For the whole merger one has to calculate as cost at the minimum an amount of about 5.1
Mio. Euro. The author used with calculation of this sort in the past always an additional
safety of at least 10 %. Under these assumptions the total expenditure for the merger of the
two companies would somewhere around 5.6 Mio. Euro. But we should keep in mind that
we made very many exceptions and assumptions in our example.
These 5,6 Mio Euro should be saved within of one or two years by cost reduction in per
sonnel, production and in logistics. If we for instance assume that both companies had
about 900 employees each, inclusively distribution and sales, these cost reductions should
be no problem.
The above simplified example should show that the ecodynamic is not only in the position
to point out general economic laws but can arrive at quantitative values for practical pur
poses which could be of high value.
The final judgment for the example calculated here and the conditions assumed would be:
because
x 1
a
2 , 1
÷
< 1 and A
M
F
Nxreal
< 0 the final statement will be:
„One is willing to do it together“
94
6. Appendix : Entropy Tax
The Entropy as Basis of a Combined Tax System for Energy and Ecology.
On the basis of the application of the first and second law of thermodynamics in the econ
omy we are able to use the entropy for defining an ‘Entropy Tax’ in combination with an
‘Ecology Tax’. For this application we use not intensive but extensive quantities. We keep
the following explanations as short as probably possible. Many details are only touched
upon.
Each ecodynamic process where we start with a product Q
1
to produce Q
2
we have an
process with a value added defined as
Q
2
= Q
1
+ W
1
(6.1)
With every process of this type we transfer useable energy as exergy irreversible into an
ergy, which we cannot use for anything. Example: The product Q
2
shall be a brick as we
use it for building houses. This brick consists out of various raw materials q
i
like clay,
sand, ashes and others. The mixture of these materials is than baked at high temperature by
burning fossil material q
j
. All this is being done in various working processes applying
working energy w
i
as value added. In total we can write as formula
Q
2
= E q
i
+ E q
j
+ E w
i
(6.2)
The result of the ecodynamic process is the end product, the brick. This process is irre
versible, as we know from the analysis of the first and second law of ecodynamics. This is
in agreement with all of our experience as it is impossible to split up the brick in all its raw
materials q
i
and q
j
as well as the work w
i
.
In general all economic processes result finally in products or gods, which cannot be
brought back into their original conditions or forms according to the second law of ecody
namics. It follows that each production process will result in a production of entropy with
the result that the entropy of the economic systems in question increases. In case of a trans
fer of products or goods from one economic system to another one the entropy increase is
transferred, too.
In addition we have to consider that every economic process will have energetic losses be
cause of waste of material, scrap, low efficiencies, losses through friction etc. These irre
versible energetic losses where exergy is transferred in anergy will finally result in an in
crease of entropy. Even service companies create entropy not only by friction among each
other. All these losses are principally irreversible.
Because each economic process increases the entropy of our world it follows that each in
crease of our standard of living results in a further increase of our entropy production of
the corresponding economic systems.
Theoretically it might be possible to define a basic standard of living that represents the
minimum for the existence of men. This basic standard of living needs energy and will
therefore increase world’s entropy. This entropy may be defined as the minimum increase
95
necessary to guaranty the existence of men. Every additional increase of entropy is not
necessary for our life and is therefore a luxury we allow us on top of what is basically
necessary. This applies especially to products which are in the last consequence really
luxury as the vacation trip to Gran Canaries or the Galapagos Island. For a seat we need if
not just a wooden stump only a threeleg stool. A leather club armchair with hydraulics to
arrive at the best position for looking at TV is definitively not necessary for living. But it is
a product, which results in an extreme high production of entropy by a not justified use of
exergy transferring it into anergy.
On the basis of what is said so far we must think about saving valuable energy recourses
we use up irrevocable. One of these possibilities would be without any question the intro
duction of an ‘Entropy Tax’ as every citizen then would know what he is doing; at least he
is noticing it in his purse.
Such entropy tax guaranties district corporations always a minimum on tax income because
the basic standard of living on a certain base will always be there. Furthermore another part
of entropy tax is almost guarantied, too, as by the second law of ecodynamics we always
have friction losses, which are almost unavoidable and are connected with the further liv
ing of man.
This type of tax would have without any question a great positive influence on our ecology
like anything that reduces energy consumption of any form or type will be beneficially to
our environment. The simplest example is the carbondioxid production. Using less fossil
energy results in less CO
2
production. This example could be multiplied almost unlimited.
Therefore it seems not only reasonable to name our suggestion not only ‘Entropy Tax’ but
also ‘Entropy and Ecology Tax’, EET.
On the basis of the presented arguments it should be possible to develop an entropy
ecology tax system, which could replace other tax types. Here we think of a ‘NetEntropy
Value Added Tax’ which might be based on the principles of the present value added taxa
tion (VAT) with the addition of a new ‘EntropyEcologicalLossTax’, EELT.
While the EET is being paid by the final customer the entropylosstax EELT will be at the
cost of the corresponding economic systems (production companies as well as service
companies) as originators of this entropy.
In the following, see also the table at the end of the chapter, we will explain the principle
of these entropyecology taxes (EET) in more detail.
The final product Q
f
will be produced with raw materials and or other basic products in
various production steps together with the energy W
i
according to:
Q
j
= Q
i
+ W
i
(6.3)
All physical material of the new product will be
Q
i
= E q
i
(6.4)
where the value Q
i
will be the money equivalent of the energy E q
i
, as shown elsewhere.
The quantity
96
W
i
= E w
i
(6.5)
represents the value added for the manufacturing of the god Q
j
, i.e. Q
j
is the sum of the
pure costs of manufacturing including material, wages and salaries and all other cost of
manufacturing.
We have shown on the basis of data of national economy that the manufacturing cost with
out the cost of material are proportional to the energy consumption of a national economy.
The sum of all w
i
values of an economic process is equivalent to the increase of entropy
with the manufacturing of the product Q
j
starting wit Q
i
:
Q
j
 Q
i
= W
i
= S
j
 S
i
= A S
ij
(6.6)
AS
ij
therefore is the increase of Entropy always connected with the manufacturing of an
economic product. The economic system that delivers the produced god afterwards to an
other economic system has then arrived entropically at its original state before starting any
production by buying physical material or spending any value added. The economic sys
tem which took over the product is in the sense a final consumer which has increased his
entropy by S
j
. For the calculating of the entropy value added tax only the value added is of
interest.
The table shows in column 1 the original material or starting products and in column 2 the
economic processes of production or sales etc. The first step will almost always be our
scratching somewhere on or just below the surface of our earth.
While in production companies the wages and salaries are only a certain percentage of the
total cost of manufacturing and therefore of the value added, we observe in service compa
nies that the costs of salaries and wages generally are dominating.
It is important that the social cost as for social security, health insurance etc. are not in
cluded in the Value Added, as this cost do not increase the entropy at this point. This will
happen only after this money will enter the economic cycle later when it is used for pur
chasing gods for instance.
In column 3 of the table we see the Gross EET, in column 4 the corresponding input tax
and in column 5 the Net EET. Insofar the scheme corresponds to the present MWSt. or
VAT.
The quantities o, , .... o represent the tax factors of the various steps of the production.
These tax factors F can vary in their amount according to the aim of the EET. For instance
one can say that the tax factors for staple food are kept very low for instance 0.1 while for
luxury products as the club armchair 0,3 will be applied and for jewelry a tax factor of 0,5.
The general measure along this line could be the energy consumption for the production
and the negative influence ecological wise parallel to the determination how important a
product is for the national economy.
On this basis it should be possible to preserve the resources of the world we live in not
only as much as possible but as much as necessary. Each damaging of our environment and
every excessive consumption of energy could be restricted by this way to a possible mini
mum. The EET is a tax with the highest guidance and control possibilities.
97
The calculation of column 5 and 6 are selfexplaining by what has been said so far. The
gross price includes the net value of the god plus the EET. If the net value of a good in
cludes other taxes by passing on for instance may be open. In the present example this case
is not considered.
So far we have not dealt with the mentioned entropyecology loss tax, EELT. This is a new
element, which can be used according to the tax aim and the amount of energy involved
and its importance to our environment as a variable directive tool. The entropy loss con
sists of the losses, wastes etc. during production or manufacturing. These losses are of
physical as well as non physical values Q
L
and W
L
, which should be kept as low as possi
ble but which are always positive and will never be zero because of the validity of the sec
ond law of ecodynamics. If we consider that Q
L
and W
L
cannot be used anymore without
an extreme high input of energy the loss is then at least equivalent to the entropy of the
loss. We therefore have:
V
L
= Q
L
+ W
L
= S
L
(6.7)
Where Q
L
are the irreversible losses on physical energy and W
L
of the corresponding costs
of value added. The EELT should be paid according to the polluterpays principal in the
corresponding stage of manufacturing. If these costs can be rolled over on the prices is for
our principal treatment of no concern. But a roll over would actually destroy the desired ef
fect.
For the exact determination of the EET we need to have the knowledge of the exact value
added of each product. These are in principal the manufacturing cost of production compa
nies and the effective salaries and wages of service companies plus other operating costs.
These are in general rather sensitive data of every economic system and a publication is
not desired in most cases. Therefore we have to define a substitute value for this value
added. This could be arrived at by the definition of a relation of net price to net value of an
economic god. On this basis one must for instance define a calculating factor F
i
for a sector
or a group of products or something similar, which serves for the determination of the
value added of this group of products or services. This would have the advantage that the
same god or services of various economic systems have the same basic values for calculat
ing the EET.
For the gross EET in column 3 we have to write according to what was said so far
Gross  EET = o W
i
(6.8)
Without going into details of the factor F we can say generally that the value of the value
added varies according to the sector of the economic systems between about 30 to 70 %
where the economic systems with a high proportion of raw material cost are in the lower
range while the service companies are located in the upper area of these figures. There are
certainly other possible ways to tackle this problem, but this should not be of decisive im
portance.
We have further the problem of how to handle governments, authorities and other agencies
with respect to EET. There is no question that these institutions create entropy in their
quality as ecodynamic service companies. They are not only responsible for turnover under
their direction as direct initiator of entropy but they are also responsible for failures in in
98
vestments, for losses by friction within and between such institutions etc. All this ends up
in the creation of entropy sometimes an even rather high one. Therefore these institutions
as for instance even the department of revenue must be responsible for their paying the
EELT for their doing. Only by this it would be possible to put the whole economy under
the necessary control for saving our resources and our environment for future generation.
In the following we shall make some further general remarks on this EET subject.
It seems not to be advisable to skip the present VAT in exchange to the EET. But certainly
one has to think about a reduction of this tax for instance in the area of basic gods for liv
ing. This could result in the fact that the sum of a revised VAT plus the new EET would be
higher than the present VAT. Here one must consider also the additional EELT. A thinking
over of the present company taxes would be advisable.
We have to consider that the EET might have reducing effects on the national energy level.
But because of the necessary increase of production in various fields because of the in
crease of world population there will be a certain leveling effect. To get more detail infor
mation on this problem one could investigate the data of the World Energy Council.
Very important seems to be the fact that the EET is a value tax, which means that this tax
will be conform to the economic development, and therefore is more or less accurate to
calculate.
The problems that the EET will create a trend for substitution will probably not very great
especially if the factors for the various product groups are accepted. Certainly there will be
some change in the volume of certain articles but this might be exactly what is the aim in
the sense of reducing energy. Regulating traffic procedures like public transportation is
certainly another field for saving energy.
The EET must have naturally a strong influence on the personal income tax. The fact that
low and medium incomes will be higher taxed percentage wise for instance for there en
ergy consumption than households with high income must result in an reduction of income
tax for the households with lower income. It might very well be that high income tax has to
be increased. Details, which can be solved.
Another thought could be to use the EET as an addition for the financing of social insur
ances especially for low and medium income groups as compensation against highincome
groups where the percentage of contributions to these insurances is percentage wise much
lower.
Without question the EET will have a strong negative effect on all luxury gods and ser
vices. But this is the aim of this tax and will be decisive for the future of men.
With respect to the distribution of the tax income the EET probably corresponds in general
with the distribution of the population, which would be more or less a qualified distribu
tion. The EELT however will practically be originated at the industrial areas, which could
raise some problems. On the other hand areas with mainly service enterprises may serve
here as a certain balancing.
Finally we should strongly point out that every citizen as the end consumer of the economy
dictates more or less by his behaviour the development of the entropy even more than any
99
industrial or service company. He is the one who is responsible for the future of mankind,
the future of his children and grandchildren. Therefore he, the citizen, has to pay for every
increase of entropy to help to reduce this increase as much as possibly toward the lowest
possible increase we could justify.
Table for explanation of the
EntropyEcologicalTax
1 2 3 4 5 6 7 8
Basic
Product
Production
or
Economic
process
Gross Entropy
Value Added
Tax
Entropy
Input Tax
Net Entropy
Value Added
Tax
Gross
Price
Entropy
Loss
Tax
Total En
tropy Tax
Primary Pro
duction
Qi Qi + Wi
= Qj
o x Wi Sp.3 Qj + o Wi o x Vi Sp.3 + Sp.7
1. Stage
of Process
ing
Qj Qj + Wj
= Qk
 x Wj o x Wi
Sp.3  Sp.4
Qk +  Wj  x Vj
Sp.3 + Sp.7
2. Stage
of Proc
essing
Qk Qk + Wk
= Qf
 x Wk  x Wj
Sp.3  Sp.4
Qf +  Wk  x Vk
Sp.3 + Sp.7
Wholesale
l
Qf Qf + Wf =
Q'f
o x Wf  x Wk
Sp.3  Sp.4
Q’f + o Wf o x Vf
Sp.3 + Sp.7
Retail Q'f Q'f + W'f
= Q''f
o x W'f o x Wf
Sp.3  Sp.4
Q’’f + o W'f o x V'f
Sp.3 + Sp.7
Total En
tropy Tax
E Sp. 5 ESp. 5 E Sp. 5 +
ESp. 7
100
FormulaSymbols and Constants
FormulaSymbols
Capital Letters: Extensive Quantities
Small Letter: Intensive Quantities
Index „x“, for instance u
x
: Inner Energy at Composition x or of a System x.
A : Greek Delta, difference of two quantities.
State Funktions:
u
x
, U
x
: Inner Energy, (intensive, extensive)
q
x
,Q
x
: Physical Energy (Material) (intensive, extensive)
w
x
, W
x
: None Physical (Immaterial) Energy (intensive, extensive)
s
x
, S
x
: Entropy, (intensive, extensive)
f
x
, F
x
: Free Energy, (intensive, extensive)
Partial State Funktions:
(AU
A
)
x
: Partial Inner Energy of the component A, in the System x
(AS
A
)
x
: Partial Entropy of the Component A in the System x
(AF
A
)
x
: Partial Free Energy of the C A in the System x
Quantities of Mixtures:
A
M
U
x
: Inner Energy of Mixing of the Composition x
A
M
S
x
: Entropy of Mixing of the Composition x
A
M
F
x
: Free Energy of Mixing of the Composition x
Partial Quantities of Mixture :
(A
M
U
A
)
x
: Partial Inner Energy of Mixing of the Component A in the Composition x
(A
M
S
A
)
x
: Partial Entropy of Mixing of the Component A in the Composition x
101
(A
M
F
A
)
x
: Partial Free Energy of Mixing of the Component A in the Composition x
Constants:
 : Ecodynamic Constant 2,43 x 10
20
[Joule]
k : Boltzmann Constant 1,38 x 10
23
[Joule / Kelvin]
N : Avogadro Constant 6,02 x 10
23
[1 / mol]
K
1
= k  = 3,35 x 10
3
[Joule / mol]
K’ = R T = 2,48 x 10
3
[Joule / mol]
1 Dollar or 1 Euro are about 0,8 kWh = 2,9 x 10
6
[Joule]
102
Glossary
Absolute Zero: Zero point of the thermodynamic scale of temperature. Fixed as 0 Kelvin [K],
0 K = 273,15 °C. At the point of abs. Zero all physical systems are in the state of their lowest
energy possible.
Albedo : The relation of reflected to total incoming radiation. For instance the desert reflects
about 30 % , this is the Albedo of the incoming solar radiation.
Anergy: Energy which cannot be used anymore neither thermodynamically nor economically
Avogadro Constant N: Number of Atoms or Molecules in one Mol of an Element or a sub
stance, N = 6,02 x 10
23
Boltzmann Constant k : The physicist Boltzmann discovered at the end of the 19. century
Natural Energy Constant, related to one atom or molecule: k = 1,38066 x 10
23
Joule per Kel
vin.
CarnotProcess : The French physicist Carnot developed 1824 the cycle process for the
theoretical maximum of the efficiency of all periodical and reversal working thermal engines.
Change of State : The transfer of a physical system or an economical system from a state A
into another state B through the change of one or more State Functions.
Control Room : A hypothetical room with defined boundaries according to the problem to be
solved that contains other (economic) systems, which are under investigation. Reason for
such room is to protect the enclose systems from undesirable influences.
Differential Quantities : A quantity dx which has the same features as x, its seize ap
proaches zero but is always different from zero. A term of differential calculus.
Ecodynamic : The combination of the words Economy and Thermodynamic. In economy
the application of the basic laws of thermodynamics.
Economic Systems : A System to supply or process goods or services of any kind. A state,
a manufacturing company or a state office etc. are economic systems.
Endoenergetic: A process is endoenergetic when it needs the supply of heat (energy) to get
it started or that cools down while in process. Melting of ice to liquid water is endotherm.
Energy: Die ability of a physical system to deliver work. We can distinguish between me
chanical, electrical, magnetical, chemical, thermal and nuclear energy.
Entropy: The engineer Clausius proposed1865 this name for a quantity (a State Function)
In physical Systems, which increases generally with all irreversible processes. A physical
system changes by itself only into a more probable state where its Entropy increases.
Exergy: The form of Energy, which can be transferred into each form of work. It is the gen
eral useful type of energy. Used Exergy transfers principally after use in another form of en
ergy, which cannot be used anymore, the Anergy. The reversal of anergy in exergy is impos
sible.
Exoenergetic : A process is exoenergetic when it creates heat while going on. Pouring con
centrated sulfuric acid in water is extremely (dangerously!!) exoenergetic.
Extensive Quantities: These are quantities, which depend on the size (volume) of a physi
cal system. They are always additive quantities.
103
First Law of Thermodynamic: The law of conservation of Energy. It says that a perpetua
mobilia of first kind, a machine that delivers work without any supply of energy from the out
side, is impossibly.
Free Energy: The part of the Inner Energy of a physical or an economical system that can
be used as exergy for any type of work.
Gas Constant R: A natural constant, which describes the relation between volume, pressure
and temperature of a gas. R is the product of the Boltzmann and Avogadro constant.
Heterogeneous Systems: Within a heterogeneous system we do observe interfaces be
tween the components. Water plus sand is an heterogeneous system
Homogeneous Systems: Systems in which we observe no interfaces between its constitu
ents. The solution of salt or sugar in water are homogeneous systems
Inner Energy: The total energy inherent in a thermodynamic or ecodynamic system. The In
ner Energy is as a state function only dependents from the inner state of a system.
Internal Energy: Same as Inner Energy
Integrating Factor: In mathematics a factor (or a quotient) which transform a not differenti
able equation in a differentiable one. In thermodynamics, the thermodynamic temperature
represents such a factor, in ecodynamic this is the factor .
Intensive Quantities: These are state function of a physical or ecodynamical system, which
are entirely independent from the size (volume) of the system. In this respect, they are differ
ential quantities or specific quantities.
Irreversible: A change of state within an economical system is irreversible (to revers the di
rection of a process) if there is no influence of the surroundings with an input of energy in that
system. All natural processes are irreversibly.
isobare : Constant pressure.
isochore : Constant volume.
Isothermal: Constant temperature.
Mixing Energy: With mixing of two (or more) components as chemicals or economic sys
tems (as in mergers) we observe normally energetic reactions. Either we have to supply en
ergy to start the process or energy (inform of heat) is developed by the process. In economic
processes, we always have to supply energy. This is called an endoenergetic process.
Mol: An international Unit (SI – Unit) for the mass of a compound, which consists of the same
number of particle (atoms, molecules) as 12 g of carbon
12
C.
Partial Quantities: The proportion of a quantity of A or B in a compound, like for instance the
entropy or other state functions, in a mixture of A and B with composition (1x) A and x B.
Perpetuum mobile 1
st
Art: A machine that delivers work all the time without any changes in
the surrounding environment, i.e. without a supply of energy.
Perpetuum mobile 2
nd
Art: A machine delivering work just by taking heat out of a cooler
bath delivering it to a warmer bath.
Probability: The degree of the realization of random events
Quantum Physics: The physics of microscopic systems under consideration of quantum
jumps explaining for instance the quantum behaviour of atoms or light.
104
Quasistatic Changes: Differential i.e. smallest changes of a state which permits to look at a
system as to be static.
Reversible: A change of state is reversible if the transfer from state 1 into state 2 and then
back into state 1 is possible without any energy supply from the outside. We do not observe
this ideal process in nature.
Second Law of Thermodynamics: All natural processes are irreversible and generally
strive for the highest degree of chaos that is the maximum possible of entropy.
SI – Units: International Unit System, since 1970, that defines all units of measure with re
spect to name and size. The defined basic units for all the other units are: Meter, Second,
Kilogram, Kelvin, Ampere and Candela.
State Function: The state of a physical or economical system is unambiguous defined by
state function quantities, which normally depend from each other. The Inner Energy u or the
Entropy s is for instance State Functions.
Statistical Physics: Part of theoretical physics, which for instance looks at macroscopic be
havior of matter on the basis of atomistic laws with the help of statistical mathematical meth
ods.
System Boundaries: Theoretical mathematical boundaries of an economic system which
enclose the part of a larger system to be investigated.
Theorem of Momentum (Impulse): In physics this is the product of the mass of a body with
his velocity. The impulse is the value of the action of a body on another body.
Thermodynamic: The science of all processes where energy of any form is involved.
Thermodynamic Analysis: A thermodynamic theory developed beginning of the 50er years
by W. Oelsen and his school at the Bergakademie Clausthal (Technical University) on the
reactions and the properties of alloys of pure metals.
Value Adding: The process of adding values to something within an economic process by
means of the action of production factors.
WeberFechner Law: Basic Law of Psychophysics devoloped 1834/1860 by W. and F. that
the intensity of a perception is proportional to the logarithm of the physical strength of the ori
gin. In newer times described by exponential functions.
Zeroth Law of Thermodynamics: If two system are in equilibrium with a third one they also
in equilibrium among each other.
105
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Page / Chapter: Indicates Pages or Chapters of special interest.
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