Georgescu-Roegen introduced a new paradigm in economics by arguing that the economic system should be viewed as an open system that interacts with the natural environment, rather than a closed system in isolation. All other schools of economic thought considered the economy as a closed system. Georgescu-Roegen said the economic system is a subsystem that depends on the larger environmental system. This view breaks from the traditional circular flow diagram that does not account for environmental inputs and outputs. Considering the economy as an open system that obeys thermodynamic laws like entropy has implications for how economic growth and development are understood.

1. 1
ANTISCIENTIFIC PARADIGM OF ECONOMICS
Fernando Alcoforado *
No school of economic thought considered the Economy as an open system. All schools
of economic thought - Marxist to neoclassical, Keynesian to Schumpeterian, etc. - share
a vision of economic system isolated of the natural environment. Thus, the view of the
economic system as closed and circular has guided the most diverse schools and
theories. The thought of Georgescu-Roegen (1906-1994), Romanian economist,
represents a break with the paradigm that considered the economic system as a closed
system.
Georgescu-Roegen says that the economic system is only a subsystem of a larger
system called the environment. The economic system (as a productive activity) should
be subjected to a larger system called the environment, and not the contrary. It is
questionable, therefore, the fact still prevail in the teaching of Economics, the paradigm
that insists on guiding this field of knowledge based, as a general analysis assumption,
only the view of the circular flow diagram, involving businesses and families, for one
hand, and the markets for goods and services and factors of production, on the other.
This narrow view of the economic system on a circular flow "closed". This narrow view
of the Economics about a circular flow diagram "closed" that does not allow
environmental inputs and outputs to the environment, it is important to note that the
circular flow diagram gives an unrealistic view of any economy, considering it as an
isolated system which nothing enters from the natural environment and nothing goes to
the natural environment, since based in this conception there is nothing outside of itself.
The circular flow diagram is strictly a representation of circulation of money in the
economy and goods in reverse. If it was an open system interacting with the
environment, the economic system should consider in the calculation of GDP, besides
the consumption of households and firms, business and government investment,
government consumption, revenue from exports and expenditure on imports, the
resulting environmental costs of depletion of the planet's natural resources and the
resulting environmental costs of soil, water resources, oceans and air pollution. In the
closed economic system, the calculation of GDP does not include these environmental
costs. The model of economic system adopted today does not consider in the output
pollution and waste to the environment and does not consider the input material and
energy from environment as limited resources. Furthermore, in the economic system
model now adopted is not taken into account also the fact that it is a dynamic system
that never reaches equilibrium which requires systematically constant adjustments in its
operation.
The economic system model adopted today operates like a perpetual motion machine, or
a machine capable of producing work without interruption regardless of the natural
environment. However, this is unrealistic because it contradicts one of the main laws of
Physics: the law of the conservation of energy. On this issue, it is recommended to use
the Italian physicist Enrico Fermi (1901-1954) who defines the first law of
thermodynamics as the affirmation of the principle of conservation of energy for
thermodynamic systems. As such, it can be expressed as follows: The energy variation
in a processing system during any transformation is equals to the amount of energy that
the system exchanges with environment. The narrow view of the economy does not
provide for exchange with the environment disobeying the law of conservation of
energy.

2. 2
The model of economic system today adopted does not respect, too, the law of entropy,
because it has diminishing returns in its operation such as the downward trend in
economic growth of world GDP and of the rate of profit in the system capitalist world.
It therefore seems clear that the entropy that occurs in the material world is reflected
also in economic activity. The Kelvin-Planck statement speaks of the impossibility of
"ideal engine" or perpetual motion because all machines will always produce energy to
be used with part of this waste in heat to be lost. Similarly, any economic system or
wealth production machine consumes materials and energy from environment with part
of their waste which return to the environment. Based on these arguments, it is
imperative to break the current paradigm in the analysis of economic systems that
ignores the existence of a close and deep relationship between the economy and the
environment.
Georgescu-Roegen spoke that energy, economy, entropy and ecology were terms and
concepts that should not be discussed (and taught) separately, as until then practiced and
is still practiced today (GEORGESCU-Roegen, Nicholas. The Entropy Law and the
Economic Process. Cambridge: Harvard University Press, 1971). For Georgescu-
Roegen, the future of the economy should not be conditioned to high rates of output
growth, but rather should consider the need for "economic degrowth", because progress,
in the way it was consolidating, it was potentially generator of chaos and disorder. Until
the 1970s, little or nothing was said emphatically called about the "limits of economic
growth".
The positioning of Georgescu-Roegen about the need to question the economic growth
was prior to the first conference on an international level in Stockholm to discuss
economic activity and its impact on the environment. Eleven years after that first
meeting in Stockholm, the United Nations (UN) has created the "World Commission on
Environment and Development" which produced, sometime later, the Brundtland
Report, "Our Common Future", complementing another important report produced by
the Club of Rome in 1972, "the Limits to Growth" in which is describing the
catastrophic interactions between human actions and their environmental impacts.
The main point of the Brundtland Report was that the global economy should meet the
legitimate needs and desires of the people, but the growth would have to fit the
ecological limits of the planet coincides with the position of Georgescu-Roegen. The
Brundtland Report also testified that humanity has the ability to make development
sustainable - to ensure that it meets the needs of the present without compromising the
ability of future generations to meet their own needs. From these international meetings,
the academic community began to rehearse his consistent observations on the
relationship economy and environment.
By stating that it was essential that everyone understand that human development
depend on the contraction of economic activity and not an expansion without brakes and
at any price that has been the practice of all countries of the world throughout history,
the sight of Georgescu Roegen really is a break with the dominant paradigm in
Economics. Consideration of the Entropy Law in economic reasoning proposed by
Georgescu-Roegen would require major revisions in the conventional theoretical
framework, starting with the basic representation of the operating of one economic
system.
The notion of entropy has drastic epistemological implications for the whole theoretical
edifice of the dominant paradigm in Economics. However, the major break is the

3. 3
admission that the process of generation of order (economic stability), which is the goal
of economic production is necessarily accompanied by the generation of disorder. This
includes from local environmental impacts to the phenomenon of catastrophic
anthropogenic climate change. The first step, according to Georgescu-Roegen, is the
abandonment of paradigm that considers the economic system as a closed system.
* Fernando Alcoforado, member of the Bahia Academy of Education, engineer and doctor of Territorial
Planning and Regional Development from the University of Barcelona, a university professor and
consultant in strategic planning, business planning, regional planning and planning of energy systems, is
the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova
(Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São
Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado.
Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e
Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX
e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of
the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller
Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe
Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e
combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011),
Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012) and
Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV,
Curitiba, 2015).