Physical Flows in Natural and Economic Systems

In this chapter the relationship between the economic system, the natural environment and physical flows is discussed. Since ‘the economy is embedded in a larger biogeochemical system by material and energy flows’, studies of the economy may benefit from a better understanding of the natural environment and its processes (Ayres, 1998). Physical laws such as the material balance (MB) principle apply equally to natural and economic systems. For studying material and product flows in a material-product (M-P) chain, the MB principle may be used to keep track of the inputs and outputs in every stage of the chain.