The Laws Of Thermodynamics

03 Jun 2024

There are three laws of thermodynamics:

• The first law states that energy can neither be created nor destroyed, but can only change form.
• The second law states the irreversibility of natural processes, that is, entropy can only increase.
• The third law states that the lowest possible level of entropy is achieved through a perfect crystal at zero Kelvin.

Unfortunately economists stick their heads into the sand when they hear these words.

The Big Bang: The origin of our current universe

One of the surprising facts about the universe is how young it is and how small the observable section of the universe is. In fact, the most popular explanation, the big bang, requires that the universe was highly ordered in the beginning. What is meant by “order” is homogenity. There were no different types of atoms or particles or hot and cold spots or even the concept of location and time. Everything was the same, compressed down to a point. However, this ordered state is highly unlikely.

The universe has a tendency to evolve from less likely to more likely states. A tea kettle falling on the ground and shattering into a thousand pieces is more likely than a thousand pieces hitting the ground, just at the right angle to join up in the air to form a tea kettle. This is the commonly given explanation for why the arrow of time is pointing in a single direction from the past to the future.

Entropy as a measure of disorder then is bound to move in a single direction. As time passes, the state of the universe becomes more disordered. Entropy always rises. The universe is destined to go from the least likely state, to the most likely state. What this means is that there is a limit to how much entropy can increase. The most likely state is also known as the heat death of the universe. Heat death does not imply the non-existence of the universe, but rather that the universe has reached thermodynamic equilibrium, with some exceptions such as black holes expelling hawking radiation. Thermodynamic equilibrium is the end of all thermodynamic activity.

Life as a contradictory thermodynamic process

Genes are self replicating structures inside of containers known as organisms. For life to exist, it has to result in achieveing thermodynamic equilibrium faster than its alternatives, otherwise those alternatives would have happened instead. However, life that achieves thermodynamic equilibrium ceases to exist. There lies a contradiction at the heart of life. Life wants to achieve thermodynamic equilibrium faster than its competition, but simultaneously not arrive at the finish line of thermodynamic equilibrium.

Therefore life must both reach thermodynamic equilibrium quicker than its environment, but also retain a thermodynamic potential with regard to its environment for as long as is necessary to replicate. In other words, life is the process of creating a concentrated entropy potential by decreasing entropy inside the life form. Since new energy cannot be created and entropy always rises, entropy must be increasing outside the life form. When life encounters a thermodynamic potential in its environment, it will want to make this thermodynamic potential part of itself! This means that if an animal encounters an edible plant, it will want to make that plant part of itself. The thermodynamic potential of the plant becomes the thermodynamic potential of the animal.

However, there is no rule that this “life form” has to consist of a single bacteria, a single multi-cellular organism, a colony of ants or a society of humans. From the genes’ perspective, all it has to do is replicate. Considering the low variance in genes between humans and the concept of inclusive fitness, there is no reason why genes couldn’t have evolved to protect the species as a whole.

The absence of growth

As mentioned above, the world has been endowed with a fixed energy reserve and a fixed reserve of matter. There are no infinitely renewable energy resources. When we speak of renewables, what we are really talking about is that we are extracting energy from the sun, which releases energy at a finite rate, instead of doing it all at once. The concept of renewable resources is misleading and only makes sense on a single planetary species scale that will only last a billion years or less. Throwaway civilization at its finest.

So what is it, that we call economic growth? What exactly is growth? Growth is a statistical artifact that measures the degree of how big the formal economy is and how far the division of labor has been developed in a given year compared to the previous year. GDP measures the total value of goods produced and services provided in a countries’ formal economy during one year. Household work and volunteerism do not count toward GDP. The development of open source software, despite having a significant indirect impact, does not count directly toward GDP. Thus, GDP does not tell us anything about the real economy. It is entirely plausible for the GDP to grow without any real change in the economy, leading to inflation or for some types of work to switch from the informal economy to the formal economy without affecting the quantity of products or services. When economists talk about growth, they are essentially saying that there has been an increase in trade, specialization and the division of labor. The GDP is purely a result of the organizational structure of the economy. Thus, a growth in GDP only indicates an increase in the quantity of the mentioned factors. It doesn’t actually imply that there is something where previously there was none, in fact, the opposite is the case. There is no growth in thermodynamics. The real economy is always shrinking and in permanent decline. The thermodynamic potential will be exhausted one day.

The economic potential model

According to the laws of thermodynamics, there can be no such thing as growth. Instead, the universe is endowed with an entropy potential and matter. This entropy potential limits the maximum economic potential of the universe. All the “wealth” is already out there and has existed for as long as the universe has been around. However, that doesn’t mean that the “wealth” is in its most convenient form. The sun represents a large energy reserve that is exhausting its entropy potential at a finite rate. The sun along with planet earth is our greatest treasure. Sunlight arrives on earth and drives life, which slowly builds up fossil fuel reserves over the course of tens of millions of years. Therefore fossil fuel reserves can only be meaningfully utilized for a short period of time. The accumulation of energy embodied in fossil fuel grants us one major benefit. The maximum extraction rate of the energy from the sun is limited and outside of our control. Despite having such an enormous entropy potential, we have to be patient and wait for the sun to release its energy over time. Fossil fuels give us the illusion of independence of the sun’s whims, but it is the sun’s whims that lead to the formation of fossil fuels to begin with. Therefore, fossil fuels represent merely an advance payment, offered by the collective effort of all life on earth that has existed in the past. The benefit of fossil fuels is that the exhaustion rate is under human control, not the energy itself, the energy is delivered exactly when we need it. In the economic potential model, nothing is ever produced. All economic processes are transformative ones, not productive ones. There is no such thing as “growth” in such a universe.

Production? Or simply the rearrangement of matter?

For most people the word production has the meaning of taking input materials to create goods, which can either be consumed directly, or be employed as another input material or as capital. The idea behind production is to take a low value good and create a high value good. The flaw behind production as a positive process is that the increase in value is again, just a statistical artifact. Given a good A selling for $100 that requires five times good B selling for $10 per unit, it is easy to believe that the $50 of created value and measured as part of GDP are somehow creating something from nothing. Before you fall for that trap, consider how much effort would be expended by businessmen if such a free lunch really existed. The expectation is that the $50 of created value have either been the result of a first mover advantage before prices have adjusted and competition has entered or they are explained by costs swept under the rug. Production involves not only input materials, but also energy, labor, capital, land and organisation. Therefore, one would assume that in the long run, the $50 are explained by these costs or else by increasing the value of the input materials until the prices match again. After all, if you could turn something worth $50 into $100 at no expense, is it really worth $50? It was worth $100 to begin with! Once you take into consideration the embodied energy in the manufacturing process to produce a good, only one factor remains. All economic activity is the controlled rearrangement of matter through the utilization of energy. The initial procurement of raw materials simply transports them from deep underground to the location where they are most needed. In metallurgical processes, the primary goal is to filter and remove unwanted material and change the crystalline structure of the metals, which is a different way of saying that one wants to change the location of individual elements inside the material. Subsequently, once the metal has been solidifed and is now in need of machining, drilling or 3D printing, the manufacturing process simply removes material where it is unwanted and adds material where it is wanted. Finally, during assembly, one simply takes fasteners and other manufactured components and simply joins them in a specific arrangement. The real economy is a complicated logistics machine that is operating at all scales.

Growth is merely the expansion of the human economic domain

Since growth cannot create energy, it can only convert existing energy reserves into less useful forms. Therefore, what growth achieves is not the creation of energy, but harnessing energy that is already there. A Dyson Sphere is a hypothetical megastructure that encompasses a star and captures a percentage of its solar power output [1]. It represents an extreme upper bound to the amount of energy that can be harvested from a single star. What it tells us is that we cannot go above this upper bound. However, the mere existence of an upper bound does not imply that we have this energy at our disposal. Without solar panels, sunlight as an energy source is elusive, but by developing solar panels and building them out, it is possible to harness what was already there and to stop the energy reserves from going to waste. But what exactly is waste? Who gets to decide that the sun shining into space is waste? Humanity cannot exert influence over rays leaving the solar system. When solar panels capture the energy of the sun, the thermodynamic potential of the sun becomes humanity’s thermodynamic potential. We are making it our own. Economic growth represents not creation, but gain of control. Growing the economy implies that humans exert more control over the environment than they did when the economy was smaller.

The inevitablity of loss of control and involuntary commitment to the past

Entropy always rises. It is inevitable that the degree of control decreases over time. The past is immutable, it represents the strongest commitment possible. Therefore idleness sees no reward in nature, if anything, the opposite is the case. Idleness is swiftly punished, with no possibility of remediating the mistake. Meanwhile under the pure time preference framework, patience will always be rewarded, even if patience means idleness. How can someone commit such an obvious mistake? The answer lies in the fact that one has forgotten the existence of capital depreciation, which is an inevitable result of rising entropy. The more general theory of loanable funds allows present abundance to become scarce in the future. The pure time preference theory is just a special case of a more general economy, and therefore wrong most of the time, but what about the loanable funds explanation? Doesn’t it then imply, that in the face of time based capital depreciation, that there could be cases where we should not postpone our consumption and dare I say, even demand a reward, for doing so? The reason is simple: What is here today, might not be tomorrow. One should strike while the iron is hot, so to speak. How would such a scenario manifest itself? What signal would tell people how they should behave? Why of course, it is the interest rate! It has performed the same task, but for the inverse case! Logically, the interest rate will simply be an indicator of capital depreciation. It will become negative. Negative, because it reflects the underlying loss of control over the capital. Therefore, it is necessary to replenish the loss, through maintenance and the like. This then makes people envious, envious of capital that does not depreciate, that does not need to obey rising entropy. They become jealous of the properties of gold, which does not decay over time, but gold does not make humans immortal, the problem is simply swept under the rug. When gold is used as money and held for the purpose of delaying decision making, the other side is still carrying the burden of rising entropy. Therefore what gold tells us, is a lie. The lie that control is not lost over time. The other side, still awaiting for the holder of gold to make a decision, is laying idle at no fault of their own, yet every waking moment in idleness represents waste in the same way sun rays leaving the solar system represent waste and that waste is irreversible. The economic potential is lost forever.

Hydrogen banking as an example of time based capital depreciation

A concrete example of the above, would be a so called “Hydrogen Bank” [2], which promises not positive interest as a reward for parting with ones capital, no, in fact, it promises daily compounding losses. Despite the fact that hydrogen and oxygen can be used as fuel and for their energy and that energy is versatile and grants us a thermodynamic potential to perform useful work, it still would not be capital in the Marxian sense. This form of capital does not grant one power to exploit others, it does the opposite! The owner of this type of capital has to pay dearly for the right to own it! Marx couldn’t possibly have complained about the accumulation of perishable commodities, but here is the rub: All capital, without exception, is perishable. Even the pyramids degraded over time.

For those who do not believe me, here is a real world example. Blue Origin has been selected by NASA as a contractor to fulfill a second lunar lander contract for Artemis 5. The mission architecture involves the launch of the lunar lander on a New Glenn (NG) rocket that delivers the Blue Moon Mk2 lunar lander to a near rectiliniear halo orbit or NRHO in short. Two more NG rocket launches are necessary to assemble the cislunar transporter built by Lockheed Martin. The purpose of the cislunar transporter is to carry liquid hydrogen and liquid oxygen to the NRHO to refuel Blue Moon Mk2. The cislunar transporter possesses sunshades, solar panels and is kept in NRHO for cheap orbital maintenance and far away from earth to avoid reflections from the earths surface that would heat up the cryogenic propellants. The electricity is is used to cool down the evaporative losses due to heat, by concentrating the heat into a portion of the vented hydrogen vapors and reliquefying the rest. The goal is to minimize boil off of hydrogen and oxygen for as long as possible to achieve so called “zero boil-off” storage. It should not come as a surprise, but in this scenario the capital is in the form of cryogenic propellants and should be used as soon as possible. If left sitting idle for longer periods, it will go to waste at some point. There is no reward for patience at all! In fact, simply maintaining the status quo aka “zero boil-off” requires a constant energy input from the sun. If we were to use gold as a store of value to hide this fact, it would be nothing short of a price ceiling on the ability to charge for storage services. At some point the person in charge of hydrogen storage would wisen up to this fact and cease providing the service. The inability to coordinate storage services implies that there would no longer be flexiblity in timing. The mission schedule must be perfect, so that idle capital is kept at a minimum and only the theoretical minimum boil-off occurs.

Capital is not productive

Under the laws of thermodynamics, no energy can be created. Since capital requires energy inputs, it exhausts the thermodynamic potential over time. Capital does not produce matter out of thin air, therefore it must take material inputs and never output more material than was input. If capital cannot operate independently, it must be operated by labor and merely becomes a large and complex tool, rather than an independent existence. Capital can only perform the transformation of the inputs to the outputs in a more or less efficient manner, while taking advantage of thermodynamic potentials to perform work. Therefore capital is the leveraging of energy and matter outside the human body, not an independently productive force. There is no difference between a wind mill and a conveyor belt in the sense that the wind mill is not producing energy, but converting it into a useful form and the conveyor belt is also not producing transportation activity, but rather giving mechanical motion a useful direction or structure. Nothing is ever produced in a thermodynamic sense. Production is always an expression of control. If something could be produced out of nothing, then by implication, everything could be produced out of nothing.

Homage to Nicholas Georgescu-Roegen

Although I must admit that I have never read any of Nicholas Georgescu-Roegen’s [3] works, his ideas have strongly influenced my desire to write this blog post, as half baked as it may be. His key theory is that economic activity is irreversible and that resources are degraded when performing economic activity. It is hypothetically possible for the universe to come to an end and for all economic activity to cease, if taken to its final conclusion. This is not necessarily a problem for us, as modern society has barely lasted more than three centuries, but it would indeed be a great theoretical concern. What happens once there is nobody there to look at the universe? Would it disappear and be replaced by a universe that can indeed be observed?

“Like Marx, I believe that the social conflict is not a mere creation of man without any root in material human conditions. But unlike Marx, I consider that, precisely because the conflict has such a basis, it can be eliminated neither by man’s decision to do so nor by the social evolution of mankind.” - Nicholas Georgescu-Roegen

One could say that exploitation does not originate from the capitalists, it originates from the fact that we are a transient mortal existence in this world. The human body is imperfect. It has a shelf life and that shelf life can always be shortened by withdrawing food and water. If humans could cease biological activity like tardigrades and simply lie in wait forever, a capitalist would have a difficult time exploiting them. If anything, workers voluntarily let themselves be exploited, because they fear an even greater exploitation: death. The capitalist did not invent death, nor the fear of death, therefore he can hardly be the original source of exploitation. Exploitation is tolerated precisely because it is better than the alternative and because Marx was not a laborer, who was forced to work hard for a living, he could never possibly have understood this simple fact. Capitalism therefore is not the great evil he makes it out to be. It is the lesser evil and the lesser evil can only be beat by an even lesser evil, until nothing but painful reality remains. Communists may promise utopia, but yet they can only deliver a slightly better society at best. Some things that truly matter, cannot be changed by communists or anyone else, because they are fundamental to life.

For those who are interested in further reading, I also recommend the excellent paper “The Role of Entropy in the Development of Economics” [4].

[1] https://en.wikipedia.org/wiki/Dyson_sphere

[2] https://hydrogen.wsu.edu/2022/03/24/the-1st-hydrogen-bank-could-zero-boil-off-storage-be-easier-than-we-think/

[3] https://en.wikipedia.org/wiki/Nicholas_Georgescu-Roegen

[4] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7516932/