Standard economic theory regards capital and labour as the main factors of production that satisfy the “cost-share theorem”. This paper argues that when a third factor, namely energy, is added physical constraints on substitution among the factors arise. We show that energy is a much more...

This article makes three important arguments that need to be integrated into mainstream economic theory. The first argument is that energy is the substance of the universe, and everything in the universe is energy. Energy (exergy in modern terminology) is neither produced nor destroyed by human...