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Role of Entropy in Sustainable Economic Growth

01 Jan 2012-International Journal of Academic Research in Accounting, Finance and Management Sciences (Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences)-Vol. 2, Iss: 4, pp 293-301
TL;DR: In this paper, the influence of globalization will not be treated in terms of its impact on any particular economic sector, but on its reflection in macroeconomic indicators such as: GDP, trade exchange, exports, imports, trade deficit, foreign direct investment, poverty etc.
Abstract: Globalization as a social and economic process is present and operates worldwide. In countries where it has greater impact, benefits on that country are greater, while in countries where it has less impact, benefits are smaller. Globalization is present in all areas of social and economic life. However, the main lever that urges it to move forward is economy. Globalization has its pros and cons. Most economists support it because the benefits of globalization are much larger than its harm. Increased international trade of a country, the movement and maximum utilization of capital and foreign direct investment, as well as technology development undoubtedly affect positively the economic growth of a country. In this paper, the influence of globalization will not be treated in terms of its impact on any particular economic sector, but on its reflection in macroeconomic indicators such as: GDP, trade exchange, exports, imports, trade deficit, foreign direct investment, poverty etc. Denial of the globalization success achieved would be unfair and even conservative, although not ignoring the problems that are rightly pointed out by skeptics. Both sides, skeptics as well as optimists are wrong to protect at all costs and exaggerate their thesis. The process of globalization should be studied on scientific, realistic and objective basis. Macedonia cannot be avoided by globalization. With the country's independence, Macedonia's economy opened to the global economy, although the benefits from trade liberalization are not that great. Country with the WTO membership increased its foreign trade exchange, but at the other hand it decorated the relationship between export and import. Lacking competitive goods and services into global market, the country failed to reduce its trade deficit, but rather it has been increasing more and more every year. Globalization has not given its fruits in Macedonia in terms of attracting foreign direct investment. The country ranks among the last ones in terms of attracting FDI. Benefits from increased FDI would be welcomed in Macedonia's fragile economy, especially in reducing the number of unemployed people, which remains one of the greatest concerns of the country. Guidelines for the benefit of the economy of Macedonia from the fruits of globalization will be the focus of this paper.
Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors present a structural economic model that explicitly allows for the interaction between an economy and an ecosystem, showing that economic activities and population growth increase ecological disordering as they downgrade the environment, while the later element has a negative impact on living standards.
Abstract: Mainstream economists have used various growth models to predict the interaction between sustainable economic growth and the endless accumulation of capital while environmental concerns and their negative externalities are left out, in most cases. In this paper, I present a structural economic model that explicitly allows for the interaction between an economy and an ecosystem. The proposed model indicates that—given a wide range of development and socio-economic infrastructure—while population growth might be a reason for the constant growth trajectory, it has an adverse effect due to the constraints of resources and the environment. This is because economic activities and population growth increase ecological disordering as they downgrade the environment, while the later element has a negative impact on living standards. The collected data focusing on different economic components show that the growth rate of GDP per capita may fall below zero as the population grows with the rate of capital accumulation and environmental depletion. Finally, considering different scenarios of utilizing solar energy for economic growth, a feasible endurance factor for sustainable development might promote the methods of using the substituted energy, focusing on solar energy. This, however, cannot be accomplished given the current speed and direction of technological progress and energy utilization.

15 citations

Journal ArticleDOI
TL;DR: In this article, the authors examine and critique the principal theoretical objection to sustainable development that emphasizes physical constraints, and more specifically entropy production, and offer a critique of the current approach.
Abstract: Development has been the main strategy in addressing the problem of sustainability since at least the mid-1980s. The results of this strategy have been mixed, if not disappointing. In their objections to this approach, critics frequently invoke constraints imposed by physical reality of which the most important one is entropy production. They question the belief that technological innovations are capable of solving the problem of sustainability. Is development the right response to this problem and is the current course capable of attaining sustainability? The article examines closely and critiques the principal theoretical objection to sustainable development that emphasizes physical constraints, and more specifically entropy production. It also offers a critique of the current approach to sustainable development. The article advocates a systems approach as a way to anchor a broad consensus in the ongoing sustainability debates. Copyright © 2014 John Wiley & Sons, Ltd.

4 citations


Cites background from "Role of Entropy in Sustainable Econ..."

  • ...Since then, many new studies on the subject have appeared that both support and reject the validity of the connection between entropy production, economics, and sustainability (Young, 1994; Addiscott, 1995; Kåberger and Månsson, 2001; Floyd, 2007; Annila and Salthe, 2009; De Pascale, 2012)....

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  • ...There is not a single biologist or physicist who can deny this central truth....’ (Rifkin, 1989, as quoted in De Pascale, 2012, p. 295)....

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Journal ArticleDOI
17 Apr 2020
TL;DR: In this paper, the authors analyze the relationship between subsystem indicators using the Higgins sustainable growth index (SGR) and the sustainable growth Index (SGSI) and propose ways to prevent the development of barriers to Gazprom's sustainable growth.
Abstract: Financial and sustainable growth policies of companies often contradict each other. In this article we analyze possibilities for overcoming this problem by investigating sustainability of financial growth of the largest Russian natural gas company, Gazprom. Unlike traditional interpretations, we consider company sustainability to result from the interaction and interconnection between the financial, energy, environmental, and social subsystems (F-E-Env-S). We analyze the relationship between subsystem indicators using the Higgins Sustainable Growth Index (SGR) and the Sustainable Growth Index (SGSI). Research shows that Gazprom’s sustainable growth system is stable, but to avoid destabilization, we propose ways to prevent the development of barriers to their sustainable growth. The article presents an approach that uses Shannon’s negentropy to improve discrimination of models of a sustainable data coverage analysis (DEA) system. DEA efficiency is first calculated for all possible subsets of variables and analyzed using Shannon’s entropy theory to calculate the degree of importance of each subset in Gazprom’s sustainable growth system. Then we combine obtained performance values and degree of importance to obtain a common performance indicator (CRS), which can significantly improve the discrimination of sustainable growth models. To visualize the transformation of the stability of the system, it is advisable to use the negentropy index. The following factors influence the SGSI level: production, energy saving, environmental rating, environmental footprint, reduction of air pollutant emissions, reduction of wastewater discharges to surface water bodies, environmental expenditures, personnel costs, social expenses, financial leverage, self-financing ratio, and EBITDA.

4 citations


Cites background from "Role of Entropy in Sustainable Econ..."

  • ...They insisted on the limits that physical and natural processes impose on economic activity and the difficulties in invoking the financial growth mechanism because establishing property rights on environmental assets is often impossible [Pascale, 2012]....

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DOI
21 Mar 2015
TL;DR: In this article, the authors view the economy as a complex thermodynamic system and calculate the entropy generation, specifically the trend in entropy production in Iran over time, and demonstrate this approach using a mathematical model and literature from ecology and macroeconomics.
Abstract: An economic system is comprised of different primary flows that can be captured in macroeconomic models with complex network relations. Theoretically and empirically in this system, weak substitution or complementarity of environmental materials, like energy and other production factors such as capital, is undeniable. This is an effective critique on neoclassical economics. In this paper, we view the economy as a complex thermodynamic system in order to calculate the entropy generation, specifically the trend in entropy production in Iran over time. Entropy can be measured as the amount of waste and pollution produced by a system based on Georgescu-Rogen’s view. Using a conceptual model, we show the basic flows in a macroeconomic network (government, households, firms and financial sector), by focusing on the amount of wastes and other entropy generators and show how to calculate the overall entropy for an economic system. Furthermore, we demonstrate this approach using a mathematical model and literature from ecology and macroeconomics with the Iranian economy as a case study. Finally, by using statistical data from the World Bank, we show the three important indices of a system, growth, development and entropy values that increased in Iran during 1970–2014. As it is shown in results, the economic entropy of Iran is increasing.

1 citations


Cites background from "Role of Entropy in Sustainable Econ..."

  • ...DE PASCALE, A. (2012). Role of Entropy in Sustainable Economic Growth, International Journal of Academic Research in Accounting, Finance and Management Sciences, 2: 293-301....

    [...]

  • ...De Pascale (2012) showed the role of entropy in stable economic growth and criticized the neoclassic eeconomist....

    [...]

References
More filters
Journal ArticleDOI
TL;DR: In this paper, a model of long run growth is proposed and examples of possible growth patterns are given. But the model does not consider the long run of the economy and does not take into account the characteristics of interest and wage rates.
Abstract: I. Introduction, 65. — II. A model of long-run growth, 66. — III. Possible growth patterns, 68. — IV. Examples, 73. — V. Behavior of interest and wage rates, 78. — VI. Extensions, 85. — VII. Qualifications, 91.

20,482 citations

Book ChapterDOI
TL;DR: It is by now incontrovertible that increases in per capita income cannot be explained simply by increases in the capital-labor ratio as mentioned in this paper, and that knowledge is growing in time.
Abstract: It is by now incontrovertible that increases in per capita income cannot be explained simply by increases in the capital-labor ratio. Though doubtless no economist would ever have denied the role of technological change in economic growth, its overwhelming importance relative to capital formation has perhaps only been fully realized with the important empirical studies of Abramovitz [1] and Solow [l 1]. These results do not directly contradict the neo-classical view of the production function as an expression of technological knowledge. All that has to be added is the obvious fact that knowledge is growing in time. Nevertheless a view of economic growth that depends so heavily on an exogenous variable, let alone one so difficult to measure as the quantity of knowledge, is hardly intellectually satisfactory. From a quantitative, empirical point of view, we are left with time as an explanatory variable. Now trend projections, however necessary they may be in practice, are basically a confession of ignorance, and, what is worse from a practical viewpoint, are not policy variables.

7,108 citations

Journal ArticleDOI
01 Jan 1995
TL;DR: The World Trade Organization (WTO) was established by agreement of more than 120 economies, with almost all the rest eager to join as rapidly as possible as mentioned in this paper, and the agreement included a codification of basic principles governing trade in goods and services.
Abstract: WHEN T H E BROOKINGS Panel on Economic Activity began in 1970, the world economy roughly accorded with the idea of three distinct economic systems: a capitalist first world, a socialist second world, and a developing third world which aimed for a middle way between the first two. The third world was characterized not only by its low levels of per capita GDP, but also by a distinctive economic system that assigned the state sector the predominant role in industrialization, although not the monopoly on industrial ownership as in the socialist economies. The years between 1970 and 1995, and especially the last decade, have witnessed the most remarkable institutional harmonization and economic integration among nations in world history. While economic integration was increasing throughout the 1970s and 1980s, the extent of integration has come sharply into focus only since the collapse of communism in 1989. In 1995 one dominant global economic system is emerging. The common set of institutions is exemplified by the new World Trade Organization (WTO), which was established by agreement of more than 120 economies, with almost all the rest eager to join as rapidly as possible. Part of the new trade agreement involves a codification of basic principles governing trade in goods and services. Similarly, the International Monetary Fund (IMF) now boasts nearly universal membership, with member countries pledged to basic principles of currency convertibility. Most programs of economic reform now underway in the developing world and in the post-communist world have as their strategic aim the

4,840 citations

Book
01 Jan 1971
TL;DR: In this paper, the Entropy Law and the economic process are discussed. But their focus is on the distribution of the entropy in the system, and not on the process itself, as we do.
Abstract: (1973). The Entropy Law and the Economic Process. Journal of Economic Issues: Vol. 7, No. 3, pp. 475-499.

3,445 citations

Posted Content
TL;DR: Aghion and Howitt make use of Schumpeter's concept of creative destruction, the competitive process whereby entrepreneurs constantly seek new ideas that will render their rivals' ideas obsolete as discussed by the authors.
Abstract: Advanced economies have experienced a tremendous increase in material well-being since the industrial revolution. Modern innovations such as personal computers, laser surgery, jet airplanes, and satellite communication have made us rich and transformed the way we live and work. But technological change has also brought with it a variety of social problems. It has been blamed at various times for increasing wage and income inequality, unemployment, obsolescence of physical and human capital, environmental deterioration, and prolonged recessions. To understand the contradictory effects of technological change on the economy, one must delve into structural details of the innovation process to analyze how laws, institutions, customs, and regulations affect peoples' incentive and ability to create new knowledge and profit from it. To show how this can be done, Philippe Aghion and Peter Howitt make use of Schumpeter's concept of creative destruction, the competitive process whereby entrepreneurs constantly seek new ideas that will render their rivals' ideas obsolete. Whereas other books on endogenous growth stress a particular aspect, such as trade or convergence, this book provides a comprehensive survey of the theoretical and empirical debates raised by modern growth theory. It develops a powerful engine of analysis that sheds light not only on economic growth per se, but on the many other phenomena that interact with growth, such as inequality, unemployment, capital accumulation, education, competition, natural resources, international trade, economic cycles, and public policy.

3,005 citations