Economic Reversibility Theory: Mechanisms, Constraints, and Systemic Evolution

Traditional neoclassical economics heavily borrows from classical mechanics, assuming that economic systems operate around equilibrium states with reversible dynamics. However, real-world economic processes exhibit strong path dependence, non-linearity, and historical irreversibility. This paper constructs a comprehensive theoretical framework for "Economic Reversibility Theory" to systematically analyze the mechanisms, boundaries, and systemic consequences of economic state transitions. At the micro level, asset specificity and sunk costs create real option value, generating hysteresis in corporate entry and exit decisions. At the meso and technological levels, increasing returns and network externalities drive positive feedback loops, leading to technological lock-in and path dependence. At the macro and institutional levels, asymmetric transaction costs of institutional change and cognitive stickiness restrict the system from resetting to prior states. Integrating non-equilibrium thermodynamics and dissipative structure theory, this paper introduces the concept of economic entropy to explain the irreversible arrow of time in economic evolution. The findings demonstrate that absolute reversibility is unattainable in reality, while relative reversibility is strictly bounded by bifurcation thresholds and structural costs. The study concludes with policy implications for macroeconomic stabilization, industrial unlocking, and environmental sustainability, emphasizing the critical importance of bottom-line thinking and path management in complex economic systems.