Legacies
Nicholas Georgescu-Roegen: His Bioeconomics Approach
to Development and Change
Kozo Mayumi
INTRODUCTION
Recent concern for ‘sustainability’ has attracted attention to the comprehensive theory of economic development, institutional change and biophysical constraints developed by Romanian-born economist, mathematician and
statistician Nicholas Georgescu-Roegen. However, his seminal and pathbreaking contributions have still not received the attention they deserve
from mainstream economists. Georgescu-Roegen’s early work on consumer
choice theory and his innovative critique of Leontief dynamic models have
never been incorporated into standard economic theory or into current behavioural and biophysical critiques of that theory. His theory of economic
development is a serious critique from within the conceptual edifice of economic thought which he himself helped build. His theoretical innovations
provide essential clues for a fundamental analysis of sustainability, at the
level of theory as well as of policy.
Nicholas Georgescu was born in Constanta, Romania, in February 1906.
He graduated from the mathematics department of Bucharest University in
1926 with the highest grade: foarte bine. On the advice of Traian Lelescu,
a prominent Romanian mathematician, he went to study statistics at the
University of Paris and obtained his PhD in 1930 with the dissertation
‘On the problem of finding out the cyclical components of a phenomenon’.
Having learned from the French mathematician George Darmoi some of
the contributions of Karl Pearson, Georgescu-Roegen went to University
College in London to study with him for two years. In 1932, he returned
to Romania and became Professor of Statistics at Bucharest University.
After obtaining a Rockefeller Fellowship in 1934, he went to the Harvard
University Economic Barometer. Unfortunately for Georgescu-Roegen, he
found that this organization had been disbanded soon after Black Tuesday —
29 October 1929 — because just the week before the crisis, it had predicted
that all was in perfect order! This bad luck, however, brought GeorgescuRoegen the fortuitous opportunity to work with Joseph A. Schumpeter.
C Institute of Social Studies 2009. Published
Development and Change 40(6): 1235–1254 (2009).
by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St.,
Malden, MA 02148, USA
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During his stay in the US, he published four seminal articles (GeorgescuRoegen, 1935a, 1935b, 1936a, 1936b) on consumer choice theory, production theory, correction of a mathematical fallacy of Vilfredo Pareto’s
derivation of the indifference varieties, and a solution to a controversy between A.C. Pigou and Milton Friedman.1 Despite Schumpeter’s desire to
write a definite economic analysis with him, Georgescu-Roegen returned
to Bucharest in 1936. In his own words: ‘The day before our sailing,
Schumpeter came to New York and took us to dinner at the Waldorf Astoria
to convince me to accept his outstretched hand. Only after many years was I
able to comprehend how hurt he must have been by the refusal of an inconsiderate youngster’ (Georgescu-Roegen, 1988a: 29). He survived for some
years under the communist government but emigrated to the United States
in 1948 with his wife Otilia. He obtained a professorship at Vanderbilt University in 1950 and remained there until his retirement in 1976. He died in
Nashville, Tennessee, in 1994. While his most famous work is The Entropy
Law and the Economic Process in 1971, the pinnacle of Georgescu-Roegen’s
theoretical contribution may well be his ambitious attempt to reformulate
economic science as ‘Bioeconomics’.
The broad spectrum of Georgescu-Roegen’s work defies any simple classification. However, in this article I argue that his bioeconomics (mostly
formulated after 1960) can be regarded as innovative and comprehensive scientific thought (see also Mayumi, 2001). In the remainder of this ‘Legacy’, I
will therefore present some essential elements of his bioeconomics approach
to development and change.
THE TWO PILLARS OF BIOECONOMICS
Georgescu-Roegen’s bioeconomics rests on two pillars: the exosomatic nature of human evolution and the fundamental importance of qualitative and
irreversible, truly novel changes in the economic process.
The notion of exosomatic evolution, which originated with the physical
biologist A.J. Lotka (1956: 369), was developed further by GeorgescuRoegen. The idea is that humanity has transgressed the mode of biological
(or endosomatic) evolution and moved into an entirely new — mechanicalindustrial — mode of evolution, relying on exosomatic (external) energy and
detachable (manufactured) exosomatic resources and money. GeorgescuRoegen’s bioeconomics emphasizes the biological origin of the economic
1. On this controversy, Georgescu-Roegen states: ‘[The] verdict was against Friedman. As
we all know, if you disagree with him however little, Milton Friedman would clobber you:
“you are totally wrong”. So I felt immensely gratified when Milton introduced me before
a lecture at the University of Chicago as the only economist who had proved him wrong.
Of course, my lecture, on Brazilian monetary inflation, “was totally wrong”’ (GeorgescuRoegen, 1988a: 27).
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process and the human problems associated with a limited amount of available resources that are unevenly located and unequally distributed. Yet, he
insists that the human-mode of existence is dominated neither by biology
nor by economics alone: ‘my use of “bioeconomics” had not been influenced by the prevailing fashion of reducing everything to a biological basis’
(Georgescu-Roegen, 1986: 249). Institutions of the market, money, credit,
enterprises of all sorts, and the internal logic inherent in these institutions,
emerged in response to the progressive evolution of the exosomatic nature
of humankind. Georgescu-Roegen’s bioeconomics is a new style of scientific thought: it is not a new branch of economics, but a new discipline that
combines elements of evolutionary biology, institutional economics and biophysical analysis associated with energy and mineral resources (Mayumi,
2001; Miernyk, 1999).
The second pillar of Georgescu-Roegen’s bioeconomics is the recognition
of the fundamental importance to (economic) development of qualitative
change, which standard (neoclassical) economics fails to analyse. Qualitative
change, a central theme of life sciences and social sciences such as biology
and economics, eludes mathematical schematization that Georgescu-Roegen
(1971) terms arithmomorphism, rooted in the mechanistic epistemology of
neoclassical economics. Because of incessant qualitative changes due to
the emergence of novelty in economic processes, Georgescu-Roegen insists
that reality can be grasped only when arithmomorphic analysis is combined
with a dialectical approach, involving in particular structural and qualitative
changes. This dialectical approach must use words, instead of numbers. The
most important part of economic history is a storytelling in words. Dialectical
reasoning can be as correct as mathematical reasoning, but very often it can
be even more penetrating. The works of Adam Smith, Joseph A. Schumpeter
and Simon Kuznets, among others, are special exemplars. Since the process
of historical change has an infinite number of properties together with the
ever-present emerging novelty, to come to grips with facts is a much more
formidable task than to indulge in empty mathematical exercises. GeorgescuRoegen was among the first to defend the absolute necessity of historical
and institutional studies in economic science. The evolutionary nature of
the economic process precludes a grasping of all its relevant aspects only
by an arithmomorphic scheme, even by a dynamic one with genuine delays
(Mayumi, 2005).
It is well known that Schumpeter’s unique vision of the economic process
had a profound influence on Georgescu-Roegen’s evolutionary views of the
economic process. Georgescu-Roegen states: ‘Every one of his distinctive
remarks were seeds that inspired my later works. In this way Schumpeter
turned me into an economist — the only true Schumpeterian, I believe. My
only degree in economics is from Universitas Schumpeteriana’ (GeorgescuRoegen, 1992: 130). Schumpeter excluded reversible changes from innovations: ‘what we are about to consider is that kind of change arising from
within the system which so displaces its equilibrium point that the new one
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cannot be reached from the old one by infinitesimal steps’ (Schumpeter,
1951: 64). Schumpeter described the same thing in a metaphorical manner:
‘[add] successively as many mail coaches as you please, you will never get
a railway thereby’ (ibid.). In evolutionary biology a similar idea of qualitative leap was proposed by Richard Goldschmidt in 1933: the ‘changes
necessary for the formation of a new species are so large that the relatively
small differences of the subspecies as a starting point would hardly count’
(Goldschmidt, 1933: 542). Goldschmidt described the possible candidates
of a new speciation as hopeful monsters that would start a new evolutionary line if fitting into a certain biological niche. Stephen J. Gould and
Niles Eldredge rehabilitated Goldschmidt’s theory in terms of punctuated
equilibrium (Gould, 1977; Gould and Eldredge, 1977). Georgescu-Roegen
mentions how a hopeful monster has become a successful monster with a
qualitative leap, so to speak, referring to Japan’s economic development:
‘The miracle is that Japan’s economy “took off ” on the back of a silk
moth. Other nations had the silkworm, but missed the same opportunity’
(Georgescu-Roegen, 1971: 293).
EXOSOMATIC EVOLUTION AND ITS PREDICAMENTS
It is true that economic growth and advancement of science and technology
through exosomatic evolution resulted in the increased material comfort typically attained by the Western World. Yet, according to Georgescu-Roegen
(e.g., 1977a, 1986), the exosomatic evolution brought about three formidable
predicaments to human beings.
The first predicament concerns the eventual exhaustion of fossil fuels
and mineral resources associated with the accelerated addiction to the extravagant comfort provided by the exosomatic organs. The recent concern
with peak oil, the most crucial fossil fuel, is not an idle question posed to
human beings (e.g., Simmons, 2005; Smil, 2008). In particular developing
countries in Asia are projected to have an annual economic growth rate
of 5.4 per cent from 2004 to 2030 (Ito, 2007). According to Luft (2007),
58 per cent of China’s oil imports come from the Middle East now and
this share will grow to 70 per cent by 2015. China’s concern for its growing dependence on oil imports has led to its active involvement in exploration and production in countries and regions including Kazakhstan, Russia,
Venezuela, Sudan, West Africa, Iran, Saudi Arabia and Canada. But China
is not the only Asian actor thirsty for oil. Other countries including India
are projected to be major contributors to the world’s energy demand. In
fact, China and India are ‘guesstimated’ to account for approximately 70 per
cent of the energy consumption in Asia over this 30 year time period (Ito,
2007) — which should be a cause of concern for most other energy-importing
economies.
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In thermodynamics there is the ‘anthropomorphic’ distinction between
available and unavailable energy for human beings, indicating that only
available energy can be used by humans. However, this distinction per se
does not imply that all available energy can actually be used for human
activities. Georgescu-Roegen (1975: 354), in his discussion of the quality of
energy sources, proposed another important distinction between available
and accessible energy: there ‘certainly are oil-shales from which we could
extract one ton of oil only by using more than one ton of oil. The oil in such
a shale would still represent available, but not accessible energy’. For the
case of oil-shale the generation of the net supply would require much more
energy than is obtained. Similarly, despite their recent surge in popularity,
agro-biofuels are, unfortunately, not accessible energy sources.
Georgescu-Roegen’s concept of accessible energy has been reinterpreted
and used by several scientists (Cleveland, 1992; Cleveland et al., 1984;
Gever et al., 1991; Hall et al., 1986) as energy return on investment (EROI):
the ratio between the energy delivered to society by an energy system and
the quantity of energy used directly and indirectly in the delivery process
over a given period of time. In our book, The Biofuel Delusion (Giampietro
and Mayumi, 2009), we present a quantitative analysis based on data sets
derived from the two most impressive large-scale agro-biofuel experiments
established on this planet: ethanol production from corn in the USA and
ethanol production from sugar-cane in Brazil. We show that agro-biofuels
do not come close to meeting the policy goals of providing energy security
against future consequences of peak oil and a reduction of GHG emission.
In the case of the USA it is the low output/input ratio of energy carriers
which makes the solution infeasible; in the case of Brazil it is the low power
level achieved in the process of ethanol production which makes the solution
unattainable.
Fossil fuels are ‘optimal’ in terms of the amount of matter in bulk required for energy extraction, transformation and transportation to support
the modern industrial society (Mayumi, 2001). Solar energy cannot easily
support current fossil-fuel based manufacturing processes; as GeorgescuRoegen argues (1979a: 1050): ‘It [the necessary amount of matter for a
technology] is high for weak-intensity energy (as is the solar radiation at
the ground level) because such energy must be concentrated into a much
higher intensity if it is to support the intensive industrial processes as those
now supported by fossil fuels’. He also argues that the necessary amount
of matter is high for high-intensity energy such as thermonuclear energy
because high-intensity energy must be contained and controlled within a
stable boundary. The conclusion that fossil fuels are superior is sometimes
called Georgescu-Roegen’s Fundamental Proposition (Kawamiya, 1983).
The second predicament is social conflict. As Lotka clearly recognized, the
fact that control over exosomatic resources (accessible energy) is unevenly
distributed among individuals, has led to ‘so much of the social unrest that
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has accompanied the development of modern industrialism’ (Lotka, 1956:
370). Since large-scale production and its distribution in human societies
has to be organized socially, the social classes of ‘ruler’ and ‘ruled’ are created. Social conflict of the human species is not the result of endosomatic,
but exosomatic evolution (Georgescu-Roegen, 1977a). Unfortunately, social
conflict will remain part of the human lot as long as our mode of existence
depends on large-scale exosomatic production and distribution. Contrary
to the Marxian fundamental faith, socialization of the means of production
cannot bring social conflict to an end. Because of its dependence on finite, non-renewable exosomatic (accessible) energy, which is very unevenly
distributed across nations as well as between individuals, human social evolution since the widespread adoption of agriculture has been associated with
large-scale conflict and social unrest. As Georgescu-Roegen puts it: ‘given
the nature of our proclivities the resultant social conflict between the élite
and their social platform is inevitable and will last under varying forms as
long as mankind remains a species living by social production and social
distribution’ (Georgescu-Roegen, 1988b: 320).
The last predicament — the combined result of the first and the second
predicaments — is the inequality among different exosomatic ‘species’,
for example, the difference between the developed and the underdeveloped
countries (Georgescu-Roegen, 1977a). This very sad predicament is an intragenerational issue. Recent concern for sustainability invokes another type
of distributional issue — the intergenerational distribution issue. On this,
Georgescu-Roegen argues: ‘[each] generation can use as many terrestrial
resources and produce as much pollution as its own bidding alone decides.
Future generations are not, simply because they cannot be, present on today’s
market’ (1975: 374). The notion of intergenerational distribution is strongly
related to the proper discount rate (if any) and to the notion of sustainability,
weak or strong.
Since humans seem to be so enchanted with miraculous technological
achievements, we have difficulty in recognizing that exosomatic evolution
has unavoidably brought about these three lasting predicaments — as well
as bringing felicitous exosomatic material comfort.
PROMETHEAN TECHNOLOGIES, JEVONS’ PARADOX
AND MINERAL RESOURCES
Georgescu-Roegen (1969) proposed a new theory of production together
with the flow–fund model, an innovative alternative to the standard production theory based on an important difference between process in farming
and process in manufacturing. Here, flows are ‘materials’ qualitatively transformed into a process. They are elements that enter but do not come out of
the process or elements that come out of the process without having entered.
Funds are agents transforming a given set of inflows into a given set of
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outflows. They are the elements that enter and leave the process unchanged:
labour, capital and Ricardian land.2
A feasible recipe is a procedure that uses an available set of necessary factors for achieving a goal. Thus, a feasible recipe must specify the flow and
fund elements, and their tempos, required for transformation of the inputs
into outputs. Baking bread, for example, is a feasible recipe, but controlling a
thermonuclear reaction is not a feasible recipe at this moment. According to
Georgescu-Roegen, a ‘technology’ is a set of feasible recipes where any input
not supplied by nature can be produced by one of the feasible recipes within
the technology (Georgescu-Roegen, 1983). A Promethean technology (or a
viable technology) is a technology that can maintain the two fund elements,
machines and people, as long as the natural resources and the environmental
services (including sinks) are forthcoming. Surprisingly enough, according
to Georgescu-Roegen (1992) there are only three Promethean technologies
in human history: (a) husbandry (agriculture); (b) the mastery of fire; and
(c) the steam engine (or more generally the mastery of internal combustion
engines) coupled to fossil energy. These three technologies share a common explosive characteristic: ‘with just the spark of a match we can set on
fire a whole forest. This property, although not as violent, characterizes the
other two Promethean [technologies]’ as well (ibid.: 150). Fertile land (not
Ricardian land) is the special fuel for agriculture. Fossil fuels are the special fuels for modern industry. Due to the explosive nature of Promethean
technology, humans quickly fell into the Malthusian instability trap by depleting the special stocks of ‘fuels’ associated with these different technologies. In particular, the explosive characteristic of the petroleum-based
metabolism of modern society, due to the abundant supply of high quality
oil during the past hundred years or so and the continuous supply of technological efficiency improvements, has been boosting the phenomena associated with Jevons’ paradox worldwide — as Georgescu-Roegen forcefully
argued.
In The Coal Question of 1865, William Stanley Jevons examined the trend
of future coal consumption and argued against the contemporary predictions
of reduction in future coal consumption triggered by technological progress
(Jevons, 1865). He explained an intrinsic human addiction to the comfort
offered by exosomatic instruments. Increase in efficiency in using a resource
leads to increased use of that resource rather than to a reduction in its use:
it ‘is the very economy of its use which leads to its extensive consumption.
It has been so in the past, and it will be so in the future. Nor is it difficult
to see how this paradox arises’ (ibid.: 141). Although Georgescu-Roegen
does not mention the phenomenon of Jevons’ paradox, he praises Jevons’
book highly and states: ‘if we reinterpret his basic point of departure in the
2. Ricardian land is an indestructible space, according to David Ricardo: ‘Rent is that portion
of the produce of the earth, which is paid to the landlord for the use of the original and
indestructible powers of the soil’ (Ricardo, 1951: 67, emphasis added).
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light of some of his side remarks, we find it now vindicated by the principles
of thermodynamics. The conclusion is far stronger than that which Jevons
reached for coal’ (Georgescu-Roegen, 1971: 295–6).
Jevons’ paradox has proven to be true not only regarding demand for coal
and other fossil energy resources but also regarding demand for resources
in general. Doubling the efficiency of food production per hectare over
the last fifty years due to the Green Revolution did not solve the problem of
hunger. The increase in efficiency increased production and worsened hunger
because of the resulting increase in population (Giampietro, 1994). More
energy efficient automobiles were produced, motivated by rising oil prices,
but leisure driving increased (Cherfas, 1991). The number of miles driven
increased at the same time that car performance improved. Now, Americans
are driving bigger and more sophisticated vehicles such as SUVs, pick-up
trucks and four-wheel drive vehicles. Building new roads did not solve the
traffic problems due to increased use of personal vehicles (Newman, 1991).
In a similar way, technological efficiency improvements in refrigeration
led to the creation of much bigger refrigerators, resulting in more overall
electricity consumption (Khazzoom, 1987).3
We know that matter in bulk, various mineral resources in particular, as
well as energy, are indispensable to the economic process. However, the
familiar bias in favour of energy seems to have been accentuated since the
oil embargo in 1973 and continues to survive because of people’s concern
for peak oil and climate change. At first sight this is understandable because
matter can be seen as a particular form of energy from a purely theoretical
point of view, based on the Einstein equivalence between mass and energy. The most salient example of this point of view, the modern energetic
dogma, is represented by the following statement: it is possible ‘to recycle
almost any waste, to extract, transport and return to nature when necessary
all materials in an acceptable form, in an acceptable amount, and in an acceptable place so that the natural environment will remain natural and will
support the continued growth and evolution of all forms of life’ (Seaborg,
1972: 138).
Georgescu-Roegen, on the other hand, emphatically objected to the equivalence of energy and matter in bulk, stressing a peculiar attribute of the
modern economic process:
[as] far as the economic process itself is concerned, we must not ignore the substantial
dissipation of matter caused not by purely natural phenomena but by some activities of
living creatures, of mankind’s, above all. It is the dissipation of some vital elements by man’s
consumption of food and timber in places far away from the farm and the forest that produced
those items. (Georgescu-Roegen, 1979a: 1040).
3. For more on Jevons’ paradox see Giampietro (1994); Giampietro and Mayumi (1998);
Jevons (1990); Mayumi et al. (1998); Polimeni et al. (2008). Jevons’ paradox is revived in
the energy literature as the ‘rebound effect’ (see, e.g., Brookes, 1979; Khazzoon, 1980).
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In thermodynamics the entropy law refers only to available energy dissipation tendency, not available material dissipation.4 However, GeorgescuRoegen correctly indicates that modern agriculture tends to destroy harmonious material circulation mechanisms. He shares this view with the great
agronomist, Justus von Liebig. Liebig emphasized the importance of material circulation in agricultural fields. The principle of his agronomy consists
in his view that the circulation of matter in agricultural fields must be maintained with manure in so far as agricultural products are consumed in cities,
and fundamental elements of soils are never returned (Liebig, 1859).
With respect to material circulation, Georgescu-Roegen proposed the
‘Fourth Law of Thermodynamics’ through his genuine concern with ecological salvation: complete recycling is impossible in a closed system (such
as the Earth) (Georgescu-Roegen, 1977b). A closed system can exchange
energy (but not matter) with the environment. The fourth law says that
even with an unlimited amount of energy available it is impossible to recycle matter completely. It seems that Georgescu-Roegen tried to establish
this alleged law as a dual to the second law of thermodynamics that refers
to energy. However, I have shown elsewhere that (a) his formulation is
not compatible with the framework of thermodynamics, and (b) ‘material
entropy’ is not entropy in physics, depending on factors such as heterogeneity of matter, available technology, the multi-dimensional value system of
humans and the overall availability of resources (Mayumi, 2001). Nevertheless, even though Georgescu-Roegen’s ‘Fourth Law of Thermodynamics’
cannot be accepted as a law of physics, his concern is important because
matter in bulk and energy are not convertible into each other. Therefore it
is impossible to judge which equivalent recovering technology, one with
more energy and less matter, or one with less energy and more matter, is
ecologically preferable. It is necessary to have a general quantitative flow–
fund matrix representing macro-global and micro-local economic systems
to tackle formidable issues concerning integrated technological assessment.
Because the Earth is a closed system, waste materials tend to remain unless
there is an effective mechanism to transform waste materials into waste heat.
Furthermore, the economic process depends not only on biological organs
but also, to a much greater extent, on exosomatic organs. Unfortunately,
there are no truly effective devices for recycling waste materials that also
maintain the structure of the economic process. Flows of dissipated matter
in bulk increase with the size of the economic process and there is great
difficulty in maintaining these large-scale material structures in modern industrial society. Georgescu-Roegen’s concern is a matter of vital importance
for sustainability.
Herbert F. Bormann (1972) and Preston Cloud (1978), two contemporaries
of Georgescu-Roegen, strongly supported his idea of ecological salvation,
4. For our present purpose we may be satisfied with the definition of entropy as an index of
the amounts of unavailable energy in a given system at a given moment.
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arguing that if the current rates of consumption of useful metals continue,
about half of the known reserves might be exhausted by 2050. In fact,
mineral resources, and particularly the geologically scarce metals, have
been becoming increasingly important. By the geologically scarce metals
we mean those metals with crustal abundances below 0.1 per cent (Skinner,
1986). It is surprising to see that such common metals as copper, lead,
zinc and nickel, all of which have large and growing rates of production,
belong to this category. ‘Most experts believe that it is in this group of
metals that shortages are likely to develop first and that these are apt to
pose a serious challenge to technological development’ (Skinner, 1986: 94).
Cloud’s caution that by the year 2050 several important scarce metals (e.g.,
molybdenum, nickel, copper and silver) would be in serious shortage is
a fundamental technological challenge. In fact, silver and gold production
already fall short of present demand, and stockpiles and savings from past
mining are being drawn upon. In 2005, for example, world silver production
amounted to 20,200 tons while world silver consumption reached 28,364
tons (US Geological Survey, 2005).
LIMITATIONS OF ANALYTICAL REPRESENTATIONS:
QUALITATIVE CHANGE IN THE ECONOMIC PROCESS
Georgescu-Roegen’s work remains very relevant to the present day not only
because of its novel bioeconomic approach to economic processes and the
fundamental insights resulting from this approach, but also because of the
particular epistemology employed. According to Georgescu-Roegen, nature
consists only of what can be perceived. Beyond that, there are only hypothesized abstractions. His ideas about the relation between nature and human
perception of nature led to an epistemology concerned mainly with valid
analytical representations of relations among facts. For Georgescu-Roegen,
any worthwhile economic theory must be a logically ordered description of
a reality’s mode of functioning.
Following his epistemological preoccupation, Georgescu-Roegen proposed an alternative analytical representation of the production function.
Neoclassical production functions, whether for individual firms or the aggregate economy, assume that any factor can always be substituted for any
other factor. The implication of this assumption is that an increase in the
input of any factor always yields an increase in output. This is the basis
for Solow’s contention that ‘[t]he world can, in effect, get along without
natural resources’ (Solow, 1974). However, those neoclassical economists
adopting the substitution assumption have not paid due attention to the essential distinction between flows and funds in the material production process
(Georgescu-Roegen, 1971). Neglecting this distinction results in a systematic indifference to the biophysical foundation of economic activities. In
fact, according to Georgescu-Roegen (1990), when designing a blueprint of
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a factory process a designer has to consider a set of three relationships: (a) the
normal rate of output (q, not the capacity of output rate) determined by the
structure of Ricardian land and capital funds to be used; (b) the relation between inflow rates (energy and materials, r; the products of other industries,
i; the waste, w) and the rate of output; (c) the structure of fund elements,
i.e., a certain number of workers to be employed (H) corresponding to the
size of Ricardian land (L) and capital (K) funds to be used.
Thus, the analytical representation of a real production process should be
in the following form (ibid.: 215):
q = q(L, K) = F(r, i, w)
and
H = H (L, K).
(1)
We can see from this representation that any actual material production
process is limitational (first introduced by Ragnar Frisch in 1931, cited in
Georgescu-Roegen, 1935a) in the sense that within the same factory process
we cannot compensate a decrease in output due to a decrease in a fund element (e.g. capital) by an increase in a flow input (e.g. natural resources).
Using the example given by Daly (1992), having access to more timber
is useless if the sawmill’s capacity is the limiting factor or, conversely, if
the bottleneck is with the supply of wood. In general, when changing the
structure of a production process, it is not guaranteed that either functions
like F(r,i,w) or funds (K or L) remain the same and even the inflows (r,i,w)
themselves might change. Thus, the representation of isoquants, the concept
of elasticity of substitution and time derivative of the same function by technological improvements, all found in the neoclassical theory of production,
lose any operational and empirical meaning. Hence, David Pearce’s claim
that ‘the [substitution] issue is an empirical one’ (Pearce, 1997: 295) is untenable unless the production process is correctly formulated. The expression of
heterogeneous factors in monetary units in aggregate production functions
(Solow, 1957) makes the situation worse, as Herman Daly (1997) aptly observed. This homogenization of inputs hides the biophysical constraints of
production activities and clouds the issue of sustainability (Gowdy, 1997).
This misconception introduced by a description of the production process in
monetary terms is inherent in the definition of weak sustainability usually
adopted by neoclassical economists: ‘the total value [in monetary terms] of
all capital stocks be held constant, man-made and natural’ (Pearce et al.,
1990).
However, Georgescu-Roegen noticed a much more serious ‘analytical
and conceptual fallacy’ (than an analytical representation of production)
within the neoclassical treatment for the development process: ‘It is high
time, I believe, for us to recognize that the essence of development consists of the organizational and flexible power to create new processes rather
than the power to produce commodities by materially crystallized plants’
(Georgescu-Roegen, 1971: 275). He calls this power ‘a -sector’: ‘an economy can “take off ” when and only when it has succeeded in developing a
-sector’.
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This issue of a -sector is related to the issue of what is produced in
the economic process. Some of those studying the functioning of socioeconomic processes seem to be confused by what is produced by the economic
process. According to Georgescu-Roegen the economic process does not
produce goods and services, but it produces a reproducible system, via the
establishment of an integrated process of production and consumption of
goods and services. When dealing with the analysis of the economic sectors — those producing added value — they not only produce goods and
services, but also produce those processes required to produce goods and
services. When considering the whole socioeconomic system, it is the integrated action of the productive economic sector and the sector of final
consumption which has to be considered. Using Georgescu-Roegen’s terminology, the economic process has the goal of reproducing and expanding
the various fund elements defined simultaneously across different levels
and scales, by using disposable flows. Following Georgescu-Roegen, then,
we can conclude that an economy not only produces goods and services,
but more importantly produces the processes required for producing and
consuming goods and services.5
We can find an analogy of production and consumption in terms of
metabolic patterns within ecological theory. In his analysis of ecosystem
structure, Ulanowicz (1986) finds that the network of matter and energy
flows making up an ecosystem can be divided into two parts: one that generates a hypercycle and another that has a purely dissipative nature. The former
part is a net energy producer for the rest of the system. The hypercyclic part
is required to keep the dissipative system in a situation of non-equilibrium
(Eigen, 1971). Since some dissipation is always ‘necessary to build and
maintain structures at the sub-compartment level’ (Ulanowicz, 1986: 119),
the net energy producing part comprises activities that generate a positive
feedback by taking advantage of sources of free energy outside the system
(such as solar energy). The role of the hypercyclic part is to drive and keep
the whole system away from thermodynamic equilibrium. The latter part
comprises activities that are net energy degraders. However, this dissipative
part is not useless for the system: rather, it has the role of providing control over the entire process of energy degradation and stabilizing the whole
system. An ecosystem made of a hypercyclic part alone cannot be stable in
time. Without the stabilizing effect of the dissipative part, a positive feedback
‘will be reflected upon itself without attenuation, and eventually the upward
5. Georgescu-Roegen shared his idea of ‘production of processes’ with another profound
thinker, George K. Zipf. In his analysis of the organizational pattern of societies, seen
as bio-social organisms, Zipf (1941) introduces for the first time the notion of critical
organization: ‘any change in kind or amount of goods or of processes within a socialeconomy will necessitate a restriction within that social-economy itself. This was true of
the discovery of steam, oil, and the like, and it will also be true of the “discovery” of leisure
time [that enhances consumption activities]’ (ibid.: 324).
Legacies: Nicholas Georgescu-Roegen
1247
spiral will exceed any conceivable bounds’ (ibid.: 57). Therefore, a subtle
balance between the hypercyclic part and the dissipative part is essential for
reproducing the stable ecosystem network. So when the ecosystem is stable,
the overall metabolic balance indicates that the various elements are produced and consumed over the food chain of the network at an expected pace:
herbivores eat plants, tigers eat herbivores and when tigers die, their bodies
are ‘consumed’ by other living creatures in order to close the nutrient cycles.
In analogous terms, therefore, a hypercyclic part is compared to production
of production process and a dissipative part is compared to production of
consumption process.
Since the true products in the economic process are productions of production and consumption processes, new means and ends are continually
invented, new economic wants are created, and new distributive rules are
introduced. The evolutionary pace of economic ‘species’ — means, ends,
wants and various relations — is far more rapid than that of the biological
species. No analytical model can deal with the emergence of novelty, for everything that can be derived from such a model can only concern quantitative
variations. Besides, nothing can be derived from an analytical model that is
not logically contained in its axiomatic basis where there is clear dichotomy
between variables and parameters. There are numberless qualities of chemical components that cannot be logically deduced from the properties of their
elements (Georgescu-Roegen, 1979b). Novelty is characterized by the fact
that even after it has occurred it is as a rule impossible to explain it with
known phenomenal laws.
For this reason, we should expect a systemic failure when using a model,
whose formal structure is given and not changing in time (based on a given
set of types), to predict the emergence of new functions and structures in an
evolving system. Here we should recall Georgescu-Roegen’s severe verdict
on the usefulness of econometric models to make predictions about the
future:
Even more crucial is the absence of any concern for whether the formula thus obtained
will also fit other observations. It is this concern that is responsible for the success natural
scientists have with their formulae. The fact that econometric models of the most refined and
complex kind have generally failed to fit future data — which means that they failed to be
predictive — finds a ready, yet self-defeating, excuse: history has changed the parameters.
If history is so cunning, why persist in predicting it? (Georgescu-Roegen, 1976: xxi-xxii)
Even Tjalling Koopmans, a staunch defender of mathematical models
in economics, shares this view concerning the deficiencies of econometric
model for predicting future events: ‘We must face the fact that models
using elaborate theoretical and statistical tools and concepts have not done
decisively better, in the majority of available tests, than the most simpleminded and mechanical extrapolation formulae’ (Koopmans, 1957: 212).
This statement refers to the success of the models in predicting future events,
not in fitting the past observations used in estimating the parameters. There is
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Kozo Mayumi
no shortage of econometric tools aided by computers by which an economist
can carve as good a fit as she or he may please.6
However, we should note that Georgescu-Roegen did endorse the legitimate use of mathematics in economic science that can lead to valid analytical
representation. In fact, he indicated two situations where mathematical models play an important role in economic science: (a) engineering economics;
and (b) for the purpose of facilitating communication and detecting possible
logical errors (Georgescu-Roegen, 1979b, 1981). Engineering economics
deals with circumscribed conditions, known prices and known coefficients
of production, and seeks to find an optimal solution. The typical example is
the case of linear programming initiated by George Danzig and further developed by Koopmans. The second situation refers to a simile of dialectical
reasoning with a solid external reference to a relevant economic problem
before constructing a mathematical model.
Although Georgescu-Roegen was a firm believer in the proper use of
mathematics, he had a serious concern with the abuse of mathematics. This
argument can be reinforced by noting that even in natural sciences the severe
limitations of mathematical treatment are recognized by the authorities of
this field. For instance: ‘even though the physicist’s most dreadful weapon,
mathematical deduction, would hardly be utilized. The reason for this was
rather it was much too involved to be fully accessible to mathematics’
(Schrödinger, 1967: 3) and it ‘is the mathematics made by us which is
imperfect and not our knowledge of nature’ (Bridgman, 1960: 62).
CONCLUSION
In this Legacy, I have touched upon some of Georgescu-Roegen’s fundamental ideas with respect to development and change. By way of conclusion,
his view on climate change should be mentioned to appreciate his farsighted
theoretical consideration.
Climate change usually refers to global warming in the context of environmental policy. However, by the early 1980s, some natural scientists
believed that global cooling was occurring. In fact, Stephen H. Schneider,
one of the influential members of the Intergovernmental Panel on Climate
Change (IPCC), supported global cooling in an article published in the prestigious journal, Science (Ichtiaque and Schneider, 1971). Carbon dioxide was
predicted to have a minor role for global warming. Regardless of whether or
not global warming is caused mainly by economic activities through massive
6. In mathematics there is a famous theorem called the Weierstrass Approximation Theorem
(e.g., Randolph, 1968: 317): a real-valued continuous function on an interval can be approximated uniformly by a polynomial. So, it is rather easy to have a polynomial approximation
that can fit perfectly well for past data using computer programming. Unfortunately this
polynomial approximation has no power to predict a future full of novelties!
Legacies: Nicholas Georgescu-Roegen
1249
use of fossil fuels,7 the following statement made by Georgescu-Roegen in
1975 deserves special attention with respect to the threat of heat pollution at
a fundamental level:
The additional heat into which all energy of terrestrial origin is ultimately transformed when
used by man is apt to upset the delicate thermodynamic balance of the globe in two ways.
First, the islands of heat created by power plants not only disturb the local fauna and flora
of rivers, lakes, and even coastal seas, but they may also alter climatic patterns. One nuclear
plant alone may heat up the water in the Hudson River by as much as 7◦ F. Then again the
sorry plight of where to build the next plant, and the next, is a formidable problem. Second,
the additional global heat at the site of the plant and at the place where power is used may
increase the temperature of the earth to the point at which the icecaps would melt — an event
of cataclysmic consequences. Since the Entropy Law allows no way to cool a continuously
heated planet, thermal pollution could prove to be a more crucial obstacle to growth than the
finiteness of accessible resources. (Georgescu-Roegen, 1975: 358; emphasis in last sentence
added)
This quote is very valuable in two respects for our debate on sustainability. First, Georgescu-Roegen suggests that thermal pollution could be more
serious than the scarcity of energy and mineral resources for sustainability.
Secondly, he argues that nuclear power plants could be a real threat to global
warming. We might recall that many governments are planning the construction of nuclear power plants due to high oil prices and — ironically —
to fight global warming.
I believe that Georgescu-Roegen’s seminal and path-breaking contributions have not yet received the attention they deserve from mainstream
7. This situation can be regarded as ‘Post-Normal’ (Funtowicz and Ravetz, 1990) in which
uncertainty, stakeholders and their value conflicts play a central role in the process of
complex decision making. Post-normal indicates a departure from curiosity-driven and
puzzle-solving exercises of normal science in the Kuhnian sense (Kuhn, 1962). Normal
science, so successfully extended from the laboratory of core science to the conquest of nature through applied science, seems no longer suitable for dealing with sustainability issues
full of uncertainty. The social, technical and ecological dimensions of sustainability issues
are so deeply connected that it is simply impossible to consider these various dimensions
as separated into conventional disciplinary fields. Developments in astrophysics reveal that
solar variability triggered by internal fusion processes together with changes in the alignments of Jupiter and Saturn seems to have had considerable effects on the earth’s climate
within the solar system (Gribbin, 1980). Unfortunately, however, due to serious uncertainty
concerning how these changes proceed and their effects, it is impossible for us to know
exactly the long-term consequences of these changes, let alone short-term influences, on
the earth’s climate. So, we do not have any substantive scientific evidence regarding the
true cause of climatic changes. The situation facing us is indeed post-normal. Concerning
the recent global warming bandwagon, the vast majority of people, including economists,
seem to believe that global warming is caused mainly by GHGs, particularly by CO 2 from
economic activities. But the models economists use, for example, the Stern Report, have
not taken the above-mentioned investigation of the sun’s variability into their analyses
and assessments. The issue at hand seems to be much more complex and formidable than
economists allegedly claim it to be.
Kozo Mayumi
1250
economists.8 His theory’s innovative aspects may give essential clues to investigating deep theoretical and policy implications for sustainability. Close
examination of the entire spectrum of his work, and new theoretical and
empirical studies based on that work, are absolutely necessary. As the last
student of Georgescu-Roegen, I do hope that this article will trigger a more
systematic investigation of his work and a fruitful discussion on this truly
profound thinker.
Acknowledgements
Servaas Storm, Guest Editor for the Forum 2009 issue of Development and
Change, kindly invited me to write this Legacy. I appreciate his invitation
and substantial editorial help. I also appreciate other editors’ valuable suggestions to improve this article at the final stage of preparing it. Thanks
are due to two anonymous reviewers’ constructive criticisms on my view
of global warming. However, I still maintain my view, so I have put my
answers to these criticisms in a footnote. Constructive disagreement is always welcome within a healthy discussion among scholars. I thank Mark
Glucina of the University of Tokushima for his valuable help in improving
the language and for useful suggestions for the content of the article. During
my writing of this article, Prof. S. Nakamura of Waseda University and Prof.
H. Tanikawa of Nagoya University provided some information on mineral
resources and construction materials that I could not effectively utilize on
this occasion. I would like to emphasize that all responsibility for the way
in which I have taken advice and criticism into the final form of this article
remains solely with me.
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I am afraid that this letter may come too late to you, so late that you may feel like not even
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Kozo Mayumi graduated from the Graduate School of Engineering at
the Department of Applied Mathematics and Physics of Kyoto University. Between 1984 and 1988 he studied bioeconomics at the Department
of Economics of Vanderbilt University under Prof. Nicholas GeorgescuRoegen’s supervision, and since then has worked in the fields of energy
analysis, ecological economics and complex hierarchy theory. Since 1998,
he has been involved in organizing a biennial international workshop (Advances in Energy Studies) in which many distinguished scholars have taken
part. Mayumi is a professor at the Faculty of Integrated Arts and Sciences, University of Tokushima, Tokushima City 770-8502, Japan (e-mail:
mayumi@ias.tokushima-u.ac.jp). He is currently an editorial board member
of Ecological Economics, International Journal of Ecological Economics
and Statistics and International Journal of Transdisciplinary Research. He
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has authored or co-authored many books and articles, including Bioeconomics and Sustainability: Essays in Honour of Nicholas Georgescu-Roegen,
co-edited with John Gowdy (Edward Elgar, 1999); The Origins of Ecological Economics: The Bioeconomics of Georgescu-Roegen (Routledge, 2001);
The Jevons Paradox and the Myth of Resource Efficiency Improvements, with
Blake Alcott, Mario Giampietro and John Polimeni (Earthscan, 2008); and
The Biofuel Delusion: The Fallacy of Large-Scale Agro-Biofuel Production,
with Mario Giampietro (Earthscan, 2009).