Thermodynamics on Main Street: When entropy really counts in economics

The implications of thermodynamics for economic theory have been a source of debate for 40 years. Adopting the framing used in modern engineering rather than physics suggests that the market place has already recognised most of these thermodynamic truths as self-evident rather than challenging basic concepts. The exception is the relatively small market for heat where the idea of thermodynamic grade, conveniently represented by the exergy or available work content of a heat source, exposes inconsistencies especially in monopoly supply and economic instruments. Earlier commentators were not wrong in the thrust of their criticisms of economic theory but may have been overly elaborate in their attack. (C) 2011 Elsevier B.V. All rights reserved.