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Thermoeconomics, also referred to as biophysical economics, is a school of heterodox economics that applies the laws of thermodynamics to economic theory. Work on the concept originates in Frederick Soddy's Wealth, Virtual Wealth and Debt (George Allen & Unwin 1926), but the term "thermoeconomics" was coined in 1962 by American engineer Myron Tribus,  Statistician and economist Nicholas Georgescu-Roegen contributed significantly to the field of study in The Entropy Law and the Economic Process. Thermoeconomics can be thought of as the statistical physics of economic value.

The school of thought focuses on applying the physical science laws of thermodynamics to economic models. Particularly, proponents argue that the first two laws of thermodynamics apply directly to the physical roots of economic theory and, especially, emplace biophysical constraints on human economies.

Basis
Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood through the second law of thermodynamics but in terms of such economic criteria as productivity, efficiency, and especially the costs and benefits (or profitability) of the various mechanisms for capturing and utilizing available energy to build biomass and do work.

Thermoeconomists maintain that human economic systems can be modeled as thermodynamic systems. Contrary to the mainstream view that individuals are motivated by profit, they assert that, more fundamentally, players in an economy seek to disperse energy — what is considered as the distribution on goods and services in orthodox economics is described as energy dispersal by thermoeconomists. Then, based on this premise, theoretical economic analogs of the first and second laws of thermodynamics are developed. In addition, the thermodynamic quantity exergy, i.e. measure of the useful work energy of a system, is one measure of value.

Theory
Where orthodox economic theory usually disregards physical constraints on economic subsystems, the thermoeconomic perspective claims that they are always limiting to some extent, and especially so as the scale of an economy grows relative to its biophysical constraints.

Individual production processes determine the energy density of various entities (i.e., buyers and sellers in an economy), and energy flows in a direction that equalizes these differences within the system — this concept has recognizable analog in the mainstream idea of economic equilibrium. Decisions are made to move energy along the steepest descending energy gradient. Regularity of economic concepts is a result of the tendency to disperse maximum energy. Energy disperse through economies in hierarchies just as heat disperses in hierarchies. Such systems found in economies exist to efficiently distribute energy.

Though thermoeconomists use these models to describe economic regularity, they also use these models to explain the unpredictable nature of economic systems. Since players have subjective evaluations of energy gradients and energy density itself is not constant, mechanisms of energy dispersal can vary in unpredictable and rapid ways. These inconstant factors cause unevenness and unpredictability in the dispersal of energy.

Economic systems
Thermoeconomists argue that economic systems always involve matter, energy, entropy, and information. Moreover, the aim of many economic activities is to achieve a certain structure. In this manner, thermoeconomics applies the theories in non-equilibrium thermodynamics, in which structure formations called dissipative structures form, and information theory, in which information entropy is a central construct, to the modeling of economic activities in which the natural flows of energy and materials function to create scarce resources. In thermodynamic terminology, human economic activity may be described as a dissipative system, which flourishes by consuming free energy in transformations and exchange of resources, goods, and services.

Economic wealth
In one thermoeconomic model, economic wealth is measured using the thermodynamic quantity of causal path entropy.

Popular Culture
The album The 2nd Law by the English rock band Muse features a song titled "The 2nd Law: Unsustainable”. A predominant sample in the song describes thermoeconomics concepts, concluding that “An economy based on endless growth is unsustainable”. Then the drop hits.