Production: a biophysical and evolutionary theory

We present an economic theory of production developed from biophysical principles and consistent with the production decisions facing businesses and other economic actors, including households and governments. The theory is a compact analytical model, derived from thermodynamics and closely related to the Black–Scholes formula for options pricing, which provides, in our view, a simplified and realistic understanding, when compared with the neoclassical production theory. The theory also explains closely related biological and social phenomena, since the underlying processes are, essentially, the same. Specific examples are provided, to illustrate some applications of this approach.