A general statistical mechanics is developed for the effects of randomly distributed inhomogeneities on the electronic properties of conducting and non‐conducting media. The theory, valid for all concentrations, sizes, and shapes of the inhomogeneities, is based on an expansion of the system energy in a powers of a complex vector order parameter &Dgr;?. The theory yields the conductivity and complex dielectric function for all frequencies, and in a trivial limit reduces to the results of the Effective Medium Approximation. The onset of metal‐nonmetal transitions is accurately predicted. As a simple example, renormalization group predictions for critical exponents are shown to be a special case of the theory.