The circular flow of money diagram from economics textbooks is not meant to imply that there is temporal cyclicality. It just represents the flow of funds from different sectors of the economy (household, government, business, monetary authority and foreign).

A good point ... but then I would ask:

Why is the basic principle graphic of circulating labour and goods ... and the money in the opposit way round ... drawn like two perfect circles?

This "picture" in my and probably others mind is wrong ...

... and influences some basic meanings like the idea of a steady state economy ...

If the economy is a perfect double circle ... then a steady state economy is just a quiet rotating circle ... it keeps the size and the speed ... and everything is perfect ... ?

But, if you think of a contiuously running process of continuously necessary doing of something ... a steady state economy stands on a sharp cliff, named the condition of continuity of the sourrounding conditions ...

It may look like a minor difference, but in my mind it changes much if I change the picture ... to a flat line over time ... rising or sinking .. instead of looking at a circle ...

Interesting. To me a simple circular flow diagram is a pedagogical device to help students see the interconnections of the production and income processes. It helps sort out the real flow, the financial flow, income, and expenditures. These are useful in explaining national income accounting for instance.

But your question is deeper (if I'm reading it correctly) and gets to the idea of the economy as a process much like an ecosystem such as a forest. In an ecosystem there is no steady  state although the energy (from the sun) is more or less constant. An economy is no different. There is no steady state, but instead it's an evolving, malleable process that "delivers the goods." I don't think the "energy" for the economic process needs to be constant. Even a "steady state" will be protean with new goods and new people.

After having said all of this, I'm still not sure if that's exactly what you are questioning...

Hi Peter,

you really got the point.

Any ecosystem is, thermdynamically spoken, an energy converting system and all parts of that system are falling under the laws of thermodynamics.

Nor any biological system neither each of its subsystems can sneak out of this truth.

There is simply nothing possible at any time which is not totally determined by its specific energy conversion rate. And nothing means nothing. (I exclude wizardry and magics which is not falling under the fundamental laws of physics)

And my point is:

Any economic system is also (!) just one of any other subsystems of any higher levels, let is be any larger ecosystem or let it be system planet earth spaceship or the solar system or else.

That forces to the conclusion:

If nor any biological system neither each of its subsystems can sneak out,

and if any economic systems is always also a subsystem of any larger system like planet earth, it follows by logical reasoning,

that also nor a single one of all economic system neither each of its micro economic subsystems can sneak out of this truth.

Which forces to the final conclusion: 

Any economic system is and will always totally determined by the amount of energy used inside of the given system to produce and deliver all products and services.

The economic system add a large amount of energy consumption which is not used to produce goods as well - that amount of energy is also a determining limit, but not directly to the size of the economic system but for is comfort use energy consumption.

And so, the steady state economy is in fact really bound to a constant flow of available energy - the savings on the consumption side can widely reduced without touching the economic system size ... but the economic system is as constant as it energy consumption in total to produce any (!) product and services in total.

For example:

Any pre industrial economic system was bound to the available amount of biological muscle machines (humans, including inhabitants and slaves) .. or could possibly enlarged by animal muscle machines - all driven by energy from food, dereived from biological sunlight to food converting machines called plants or secon level plant eating animals.

And the same is valid for any machine of a non biological character ... driven by external energy from fossil fuels, renewable fuels or whatever fuels. 

Regards, Olaf