Entropy, Environment and Resources

Environmental protection and resource use are closely interrelated, for generally it is the transformation of raw materials that causes pollutants. The problems in these two areas are of a long- run nature, whether they are considered separately or in their relationship to each other.

In the first Chapter we provided an introduction to dynamic relationships in resource and environmental economics. In Sects. 1.2.1 and 1.2.2 we demonstrated the temporal structure of the three uses of the environment for mankind, simultaneously showing how all three functions are interrelated. In Sect. 1.2.3 we additionally considered the temporal structure of production by modelling both the production sector and the environmental sector with capital formation.

Thermodynamics is that discipline of physics which is concerned with the behavior of systems that contain a large number of particles. Thermodynamics involves two important alterations if compared to classical mechanics, that part of physics which is concerned with the movements of a small number of particles.

So far the flow of environmental goods (or the negative flow of entropy) from the ecological system into the economic system has not been closely specified. In the following we want to show how the problem of resource scarcity can be specified within the entropy approach. We start by taking note of the fact that the flow of environmental goods, carrying with it a negative flow of entropy into the economic system, contains also the raw materials needed for the manufacturing of the consumption and capital goods in the production sector. The supply of the economic system with raw materials from the environmental sector can therefore only be secured if the ecological system possesses the long-run capability of providing a negative flow of entropy into the economic system. This negative flow of entropy must correspond to the desires of the economic agents.

Before turning to the special properties of the new features of the model, let us note once again that in this Chapter we shall not yet deal with the questions of the treatment of waste materials and pollutants.

In the preceding Chapter we described the structure of the resource model and found that there were two techniques with which consumption goods can be produced. Technique T₁ consisted of one single production process R₁ only. This process was assumed to produce consumption goods without any nonrenewable resources having to be extracted. With the set of techniques {T₂(κ, 0 ≦ κ ≦ 1} the consumption good can only be produced, however, if resources have already been extracted from the environmental sector. It consists of production processes R₂, R₃, and of the set of processes R₅(κ) 0 ≦ κ ≦ 1.¹ R₂ serves exclusively the production of consumption goods — as did process R₁. It requires the use of a capital good, however, which must first be produced in process R₃. This in turn requires scarce resources, which have to be extracted from the environment with one of the processes of {R₅}, depending on the resource concentration. In the context of this resource model, a change from technique T₁ to technique T₂ implies a transition to a production technology which uses non-renewable resources.

After having discussed aspects of the resource problem within our capital theoretic approach in the preceding two Chapters, we shall now investigate two interdependencies between environmental protection and the resource problem. These are recycling (the recovery of resources from waste materials) and deposition (the controlled dumping of waste materials in the environmental sector).