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Entropy and Assimillative Capacity and a Revised Theory

The recognition of two important concepts in science, namely the assimilative capacity of nature and the entropy of law of thermodynamics enables the formulation of an alternative framework for factor-utilization in economics. This framework, which includes environmental capital (KN) as a factor, enables the illustration of the entropy law being the driver of diminishing marginal returns and the limited ranges of substitutability between factors. The paper also illustrates the estimation of KN utilization as point-estimates for Australia. These estimates when compared with the rates of economic growth suggest the presence of entropy.