Montag, 25. Januar 2016

Understanding the dissipative structure of out of equilibrium economies (Part 1, Rev1)

We have dealt with the fundamental conceptual problems that arise from the macroscopic and microscopic aspects of the second law of thermodynamics. It is shown that non-equilibrium may become a source of order and that irreversible processes may lead to a new type of dynamic states of matter called „dissipative structures“.
Ilya Prigogine (1)

The term dissipative structure describes the phenomenon of self-organizing, dynamic,
ordered structures in nonlinear far from thermodynamic equilibrium. Dissipative
structures are formed only in open nonequilibrium systems, which exchange energy,
matter, or both with their environment. Whith the establishment of ordered structures,
the local entropy decreases; This minimization of entropy of the system must be
balanced by a corresponding exchange with the environment.
The established shape of the ordered structures is critically dependent on the system
parameters, and the transition from disordered to ordered state takes place in a
spontaneous way. Dissipative structures show a certain stability (non-equilibrium
stability) against interference from outside, but disintegrate as soon as the exchange
the environment is interrupted or in case of major system parameter disturbances.

Examples of dissipative structures are the formation of honeycomb cell structures in
a heated liquid from the bottom (Bénard effect) or at phase boundaries in fluid
dynamics, flow equilibria in biochemistry, hurricanes, chemical clocks and candle
flames. Dissipative structures have much in common with biological organisms, which is
why living things are also often counted among these.
The Earth's surface, including the atmosphere constitutes an out of equilibrium
energieumsetzendes (dissipative) system that absorbs energy radiated by the sun and
emits heat into space. Within this system, a variety of dissipative structures,
such as clouds, rivers, hurricanes or economies can be found.
Even an economy constitutes a dissipative system, in which the increase in the degree
of complexity increases the throughput of energy and production of entropy. The
so-called technical progress within the meaning of the Solow residual can thus be
explained by a complexity increasing for increasing the efficiency of converting
primary energy into useful work for the economic production process. (10)
Dissipative structures here are capital goods (machinery) and organization (companies).

(Translated by the author from the corresponding Articel on the German Wikipedia as of Jan. 25th, 2016 (11).)

Now when we take a closer look at an economy and describe it as a dissipative structure the picture that arises looks like this:

So we have a source of energy (human work leveraged by technology and enhanced by fuels) which feeds two flows (black). One flow into the build up and maintainance of the infrastructure like enterprises, machinery and capital equipment of all sorts and a second one into consumption. In the opposit direction we have corresponding money flow. The ultimate source of money is the banking system and the money is used to pay for good and services which are consumed (dissipated) and for so called investments in enterprises, capital equipment and realated services which are needed to produce the goods consumed in an efficent way.
So money is the steering tool in this arrangement and the money flows determine how much labour and energy flows into the production infrastructure and how much into the production of goods and services for consumption. Already on this very abstract level, which does not show and analyse the interweaved relationships between infrastraucture utilization and consumption etc., it becomes obvious, that a reduction or stop of the money supply must have severe consequences, because the correspondig labour and energy flow will be reduced or stopped as well and the thing can collapse. And this is what almost happened in 2007/2008 when an entrenched mainstream economist like Ben Bernanke who has no idea and is ignorant towards such views, stopped the expansion of the money supply of the largest economy in the world, when he was at the helm of the Fed. And the world is not only still suffering the repercusions of this stupidity but is in the danger that Yellen is trying to do it again. How rediciolous that is, will be shown in an more detailed analysis in part 2. Stay tuned.

Sapere Aude !

Georg Trappe

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