Entropy Economics: The Living Basis of Value and Production

Economists dream of equilibrium. It’s time to wake up.

In mainstream economics, markets are ideal if competition is perfect. When supply balances demand, economic maturity is orderly and disturbed only by shocks. These ideas are rooted in doctrines going back thousands of years, yet, as James K. Galbraith and Jing Chen show, they contradict the foundations of our scientific understanding of the physical and biological worlds.

Entropy Economics discards the conventions of equilibrium and presents a new basis for thinking about economic issues, one rooted in life processes—an unequal world of unceasing change in which boundaries, plans, and regulations are essential. Galbraith and Chen’s theory of value is based on scarcity, and it accounts for the power of monopoly. Their theory of production covers increasing and decreasing returns, uncertainty, fixed investments over time, and the impact of rising resource costs. Together, their models illuminate key problems such as trade, finance, energy, climate, conflict, and demography.

Entropy Economics is a thrilling framework for understanding the world as it is and will be keenly relevant to the economic challenges of a world threatened with disorder.

James K. Galbraith holds the Lloyd M. Bentsen, Jr Chair in Government/Business Relations at the LBJ School of Public Affairs, the University of Texas at Austin.  His recent books include Entropy Economics:  The Living Basis of Value and Production (with Jing Chen); Inequality: What Everyone Needs to Know; and Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe.

Jing Chen is assistant professor at the University of Northern British Columbia.