The first law of thermodynamics states that energy cannot be created or destroyed, but only changed in form. The second law of thermodynamics deals with a fundamental fact of the transformation process. It basically states that whenever energy is transformed, some energy is converted to heat and dissipated, and therefore no longer able to do work. This loss in the ability to do work, means that the quality of the energy is degraded.

A similar process occurs for matter; matter cannot be created or destroyed but it can be transformed. When materials are transformed, their unique and valuable structural properties are always somewhat degraded and are no longer available to be used in precisely the same way again (see entropy).

For example, a piece of coal has a particular organizational structure in chemical/physical terms. Coal is valuable because of its energy density , the temperature at which it can be combusted and the amount of energy it gives off. When coal is transformed in the process of combustion, these unique and valuable characteristics are degraded, and the resulting ash and heat energy released to the environment can never again accomplish the same amount of work. Economic activity not only uses material in the process of production, it also “uses it up” so that it cannot be used again in the future. This law applies to all the material throughput upon which our economy depends. Reuse and recycling may extend the usefulness of some materials, but each use degrades their valuable characteristics.

By pointing out the finite nature of the material world, and the degrading aspect of all energy and material transformation during economic activity, these laws of thermodynamics and entropy beg the question of how much degradation of resources can or should be tolerated as a result of economic activity. This is another way of asking what the sustainable scale of the economy can or should be in relation to the ecosystems which contain and sustain it.

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