Information, economics, and evolution: What scope for a ménage à trois?

Abstract

The second half of the twentieth century will be remembered as the period in which information came to replace energy as the central fact of life in post‐industrial societies. Yet we continue to confront the phenomenon with the conceptual tools of an energy based economy. These take information to be costless and freely available as a support to economic transactions. In the paper information is taken to be the focus of an economic transaction.

The second section of the paper traces the energy based approach to economic analysis to a nineteenth century obsession by economists to emulate the success of the physical sciences by borrowing and adapting their concepts. In the third section the need for an economics that can cope with discontinuous and evolutionary change—and hence with information processing as a form of economizing—is discussed and developed. In section four, a distinction is drawn between knowledge, information, and data, the latter being a form of low level energy that has the capacity to act informationally rather than mechanically, and thus to create an “observer.” Evolutionary processes are then hypothesized to involve the gradual substitution of energy acting informationally for energy acting mechanically in physical systems and to do so in ways that are consonant with Maupertuis's principle of least action and that bring about a minimization of entropy production.

It is hypothesized that this process can be represented by means of an evolutionary production function with data and physical inputs being respectively treated as factors of production. The characteristics of this production function are compared in section five with those used in more orthodox economic theorizing and some of the advantages of the new production function are discussed in the concluding section. It is argued that the evolutionary production function, by treating data as a factor of production, and hence taking the production of information as an attempt to economize on the processing of data, offers greater generality, explanatory power, and relevance than the energy oriented production functions currently used by economists.

Keywords:

• information
• production
• function
• evolution
• economics
• entropy production