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In his book The Origin of Wealth, Eric D. Beinhocker says that

A pattern of matter, energy, and/or information has economic value if the following three conditions are jointly met:

  1. Irreversibility: All value-creating economic transformations and transactions are thermodynamically irreversible.
  2. Entropy: All value-creating economic transformations and transactions reduce entropy locally within the economic system, while increasing entropy globally.
  3. Fitness: All value-creating economic transformations and transactions produce artifacts and/or actions that are fit for human purposes.

These conditions seems pretty logical for me, particularly the "fitness" thing. However, I wonder about the "irreversibility" part: it sounds logical to state that, say, once a tree is transformed into a chair it cannot be turned into a tree again; so, making a chair is clearly irreversible. In the same vein, if a barber cut the hair of someone, he or she can not "uncut" it - irreversibility, of course.

But what if I was a doorman? My job would be to open a door for the others the whole day, which is a service that many people value to some extent, i.e., I would be creating some value in the economic sense of the term, right? But I can close the door as easily as I can open it, so it is something clearly reversible. Thus, it seems obvious I may do something "reversible" that is valued by someone - should I conclude Beinhocker is wrong or - I as suspect - I am missing something?

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    $\begingroup$ Thermodynamics developed from efforts to convert scarce sources of energy into desired work or desired heat. Humans do not value the irreversible waste heat so it is the natural cost of producing desired energy or heat. Human values arise as subjective cognitive experience inside living bodies assembled inside a negative entropy region mostly near the surface of the earth. The Sun sends high frequency radiation to warm the earth, life is an unstable homeostatic equilibrium in a negative entropy state, and re-radiation at lower frequencies dissipate waste heat into outer space. $\endgroup$ Nov 10, 2021 at 1:03
  • $\begingroup$ @SystemTheory, you offered a pretty nice insight: Humans do not value the irreversible waste heat, which is certainly differrent from "Humans do not waste energy to perform certain simple activies" as I thought. Stupid me, thank you! $\endgroup$ Nov 11, 2021 at 11:56
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    $\begingroup$ Second insight: human values appear to exist only in the region of negative entropy near the surface of the earth or in a system where cognitive abilities are supported by local negative entropy. The effort in economics to assert that supply and demand reach equilibrium occurs in the context of human values which is negative entropy state that is not stable in the long run. Cognitive processes have multiple equilibria so the economic agents should not always converge to cause stable equilibrium it would always be a temporary equilibrium or saddle point in an unstable system. $\endgroup$ Nov 11, 2021 at 16:47

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The author talks about thermodynamic irreversibility. Thermodynamic irreversibility exist any time that original conditions cannot be restored without expenditure of energy. Opening and closing doors is thermodynamically irreversible (eg see here). Only actions where there is no dissipation are thermodynamically reversible, as implied by the laws of thermodynamics.

However, this being said Beinhocker uses extremely fringe definition of value. In economics we do not typically define value in terms of thermodynamics.

In economics, the dominant theory of value is the subjective theory of value that posits that things have value because individuals subjectively perceive them to have value.

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  • $\begingroup$ 1muflon1, the reference you cited addresses sharply the point I was confused about: A system that undergoes an irreversible process may still be capable of returning to its initial state. However, the impossibility occurs in restoring the environment to its own initial conditions. The issue here is not the oddity of Beinhocker's definition, but my own ignorance of what is an "irreversible" process. $\endgroup$ Nov 8, 2021 at 20:40

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