The Hotelling Rule for Entropy-constrained Economic Growth*

Lozada, Gabriel A. (1995), “xxx”, Ecological Economics, ?: ???-???. The entropy change of the solar system between now and its final heat death is fixed. The time to the heat death is determined by the rate of entropy increase between now and then. If this rate of entropy increase is itself increased by economic activity, then economic activity is generating a negative externality. By internalizing this, a social planner treats the fixed amount of entropy change remaining until the heat death like the stock of an exhaustible resource. This leads to an analysis along the same lines as Hotelling's neoclassical economics of exhaustible resources, forming a partial synthesis between neoclassical economics and Nicholas Georgescu-Roegen's “ecological economics” work on the entropy law.