The Process of Globalization
Earth (Photo credit: tonynetone)
An non-reversible process is a process in a system that changes from a state to another one losing energy. This energy cannot be recovered if the process is inverted. The magnitude used in order to measure irreversibility is entropy. Entropy can be considered as a kind of energy that cannot provide work.
In nature, all processes are non-reversible but some of them can be more entropic than other ones. The existence of entropy implies that we cannot go back in time to a previous state. The entropy of universe is always been increased but there is not a reason in order that the entropy of a system cannot be reduced. This fact is possible but we will need to employ a lot of additional energy to do that increasing much more the entropy of the environment.
Economy can be seen as a thermodynamic system, a thermodynamic system is defined by a set of state variables that follows a certain rules and principles. A system is defined but a certain number of state variables, but other additional variables can be obtained from the state variables. The minimum number of the variables that define the state of the system is the dimension of the state space.
Economists use a set of variables to characterize the state of an economy, for instance: savings, investment, employment, debt, GDP. Entropy usually is not a magnitude used by economists, but it can be calculated as a macroeconomic value from a detailed microeconomic analysis, or from other state variables. Entropy would be proportional to the logarithm of the number of possible microstates. seen
Entropy is well understood as an energetic magnitude but in simpler words it is related to the degree of disorder in a system. In the statistic approach, it is related to uncertainty. Economy as any other process in nature tends to increase entropy in a natural way. That is because there are much more disordered states than ordered ones.
As I have said before, it is possible to put a system into a more ordered state but it can only be done spending a lot of energy (or in more economic terms, spend ing a lot of money) and increasing the entropy of the environment (or its uncertainty).
Following this scheme is easy to understand some current economic phenomena. For instance, the crisis of the Euro can be explained under an entropic-based reasoning. The Euro establishes links among different economies with different economic state and production capabilities, without a central controller and a lot of economic subsystems with an own controller. Following a natural behavior all countries should finally reach an equilibrium with a similar relative state, but this is not possible as different controllers and rulers are trying to avoid the entropy of their own economies getting the effect of preserving the best economies(in higher state of energy) avoiding to improve the state of other economies (in a lower state of energy). The efforts of countries as Germany to preserve its state in an interconnected economy require a lot of energy that must be obtained from its environment (the other countries of the Euro zone). Namely, Germany is not paying the crisis of other countries as many people think. It is avoiding the natural process of equalization, forcing other countries to spend much more money in order to preserve the production level. Although this can be seen as something odd for them, this is real meaning of the risk bonus of the debt. It is only entropy, energy (or money) that cannot provide work (or production). Entropy can explain why German debt is getting negative interests too due to the need of the investors at the peripheral countries of searching for safer investments. This is showing that it can be possible to reduce its own entropy at the expense of the environment.
I know that if we try to do a cause-effect analysis, many people will say that I am changing cause by effect. But this is not...
Please join StudyMode to read the full document