Title: Financial inclusion as a catalyst for reducing social entropy: application of thermodynamics

Authors: Sabana Parveen; Souvik Dey

Addresses: Department of Economics, The University of Burdwan, Bardhaman, West Bengal, Pin 713104, India ' Department of Economics, The University of Burdwan, Bardhaman, West Bengal, Pin 713104, India

Abstract: This scientific research uses thermodynamic laws to model the relationship between financial and social inclusion in 113 nations (2005-2022). Unlike other models, it regards FII as economic energy, SII as the ordered state, and capital-labour ratio as economic temperature. Using two-stage PCA, we constructed the composite index of SII and FII then employed the neo-classical theory of Cobb-Douglas function and logit model to test three thermodynamic hypotheses. Results indicate that FII significantly boosts SII, particularly in middle-and low-income countries with rising returns to scale, and reduces SII variation (entropy), implying more stability. The Boltzmann-type pattern of high inclusion, tempered by FII and structural balance, provides new perceptions into equality, efficiency, and convergence.

Keywords: financial inclusion; social inclusion; thermodynamics; capital; labour.

DOI: 10.1504/IJEX.2026.151378

International Journal of Exergy, 2026 Vol.49 No.1, pp.60 - 78

Received: 19 May 2025
Accepted: 16 Jul 2025
Published online: 26 Jan 2026 *

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