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A theoretical framework to study the economic importance of energy

Updated: Oct 24, 2018

Benjamin Leiva

PhD Student

University of Georgia

Athens, GA, United States


Using marginal analysis, we develop a theoretical framework to study the economic importance of energy without considering it a factor of production. Instead, for an autarkic agent, energy is considered a constraint in consumption and an objective in production. Despite such roles, which are meaningfully justified, the framework implies that power —and not energy— is generally the limiting resource. Among other implications of this perspective, we show that initially autarkic agents establish commodity prices when they exchange, and that under perfect competition, market prices arise as social representations of the marginal embodied energy of goods.

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