A Thermodynamic Model of Capitalist Profit: Entropy Reduction in Production and Innovation*

Abstract: This paper proposes a reformulation of capitalist profit, departing from classical Marxist surplus value theory and reframing it as a function of entropy reduction in three dimensions: the material organization of production, the conceptual organization of innovation, and the labor-mediated transformation of entropy itself. Drawing inspiration from thermodynamics and information theory, this approach models profit (K) as a function of the system's transformation from disorganized to organized states across time, integrating labor as an irreducible entropic agent.

1. Introduction

Traditional Marxist economics locates the source of capitalist profit in the exploitation of labor: surplus value extracted from workers whose labor produces more value than their wages reflect. While analytically powerful, this theory underrepresents the organizational and conceptual inputs the capitalist contributes, particularly in high-complexity or innovation-driven contexts. This paper introduces a model that supplements surplus-value theory with entropy-based reasoning, and further argues that labor itself is a key entropy-reducing force in any production system.

2. Entropy in Economic Systems

We define economic entropy as a measure of systemic disorganization, drawing metaphorically from thermodynamics and information theory. A capitalist intervention reduces entropy by creating ordered structures:

Constructing supply chains

Hiring and coordinating labor

Designing production workflows

Introducing new product concepts

In addition, labor itself is framed not merely as a commodity or variable input, but as a direct entropy-reducing agent—transforming raw materials into ordered, value-bearing outputs. Without labor, entropy-reduction does not materialize in physical form.

3. Formal Model

Let

E(0) = baseline entropy state (pre-ideation)

E(1) = entropy after conceptual organization (idea formed, not yet implemented)

E(2) = entropy after productional organization (system fully structured and operational)

3.1 Entropy Reduction in Production

where

c(p) is the productivity coefficient of entropy reduction in material organization.

3.2 Entropy Reduction in Innovation

where

c(i) is the coefficient of innovational productivity (e.g., creativity, market vision)

3.3 Entropy Reduction through Labor

We now introduce a labor function measuring the entropy-reducing capacity of applied labor over time. Labor reduces entropy directly through purposeful, ordered action:

where

c(l) is the coefficient of productivity through labor.

4. Temporal Dynamics

All coefficients  vary with time. Market competition, fatigue, training, and saturation cause productivity to evolve or decay:

5. Combined Profit Function

Integrating these over time yields the cumulative profit outcome:

This captures the full entropy-reducing profit function across innovation, capital organization, and labor.

6. Discussion

This model presents an alternative to the labor-only theory of value without abandoning the Marxist insight that value arises from transformation. It frames the capitalist as an active entropy-reducing agent, and labor as the thermodynamic mechanism by which entropy is physically overcome. Labor is not just exploited—it is the very tool through which entropy is converted into form.

It also accommodates:

• Temporary monopolistic profits (high in early idea phase)

• Diminishing returns (falling over time)

• Labor's varying contribution to order and complexity over the process timeline

7. Conclusion

Profit, in this entropy-based framework, is the measurable reward for reorganizing chaos into order. It includes the brute logistics of setting up production, the delicate act of ideation, and the essential transformation performed by labor. This tripartite reduction of entropy offers a productive re-reading of capitalist value creation that spans both classical material and modern conceptual economies.

Keywords: entropy, profit, Marxism, innovation, production, thermoeconomics, creativity, labor theory, entropy reduction

*Reworking of a previous informal article by the author - "Kar Marx (ya da Kar Marksimizasyonu", 2014.