I am always trying to puzzle out how the financial and real economies are related, and how the loss of functioning ecosystems may eventually put the brakes on both – hopefully, in theory, with the financial markets acting as some sort of cushion where prices rise and allow some degree of adjustment that reduces the onset of actual physical shortages and severe hardship. Anyway, I heard an interview with Warwick Powell recently that seemed to cover some of this. Below is the Goodreads description of his most recent book (which I haven’t read).

Thermoeconomics in a Time of Monsters: Rethinking Theory, China and International Geopolitical Economy

In an era when the old world is dying and the new one struggles to be born, Thermoeconomics in a Time of Monsters delivers a groundbreaking reframing of political economy through the unforgiving laws of thermodynamics.

Warwick Powell argues that all social-economic systems are fundamentally energetic and metabolic. Their reproduction, stability and resilience are perpetually threatened by entropy—the natural tendency toward disorder and energetic dispersion. Successful societies survive and thrive through deliberate negentropic energetic renewal, efficiency gains, and institutional arrangements that convert energy surpluses into sustained order.

Building on classical concerns with value, surplus, production and circulation, Powell develops Systemic Exchange Value (SEV) theory. Money, information, supply chains and fictitious capital are reinterpreted as energetic phenomena. The result is a coherent ontology that integrates thermodynamics, endogenous money and information theory.

I often hear the claim that classical economics “ignores” or “doesn’t know about” land, energy, natural resources, or ecosystem services more generally as an input to production. I don’t think this is exactly true, they just choose to assume these factors are negligible compared to labor and capital, and they have some sound evidence that this assumption has been reasonable over the past couple centuries. What could change their minds is if the assumption becomes unreasonable because high prices or outright shortages of food, water, energy, and/or the physical environment’s ability to absorb our wastes becomes a large factor relative to labor and capital. Then maybe that will force a merger between the abstract models of economics and the iron laws of our actual physical universe. But is it possible that incorporating these factors in advance could help us head off the crisis? You might want to try to invent a parachute before you jump off the cliff, not while you’re in freefall.