Value and Information -- A Profit Maximizing Strategy for Maxwell's Demon

The Journal of the Santa Fe Institute. 1(2) 58-63, 1995

University of Alberta School of Business Research Paper No. 2013-630

Posted: 7 Jun 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Harold J. Morowitz

George Mason University

Date Written: December 6, 1994

Abstract

Applications of Lagrange's method of undetermined multipliers in physics and economics suggest some analogies between the two disciplinces. By using the work of E. T. Jaynes on information theory, the long standing problem of Maxwell's demon in thermodynamics can be cast as a constrained optimization problem where information and energy are dual concepts. Temperture emerges as the energetic price of information. This approach to the problem of the Maxwell demon highlights the economic features discussed byu Bridgman. It also suggests that an analog to temperature (or the price of information) should be present in any optimization problem constrained by costly information. A trivial economic example of this is discussed.

Suggested Citation

Morck, Randall K. and Morowitz, Harold J., Value and Information -- A Profit Maximizing Strategy for Maxwell's Demon (December 6, 1994). The Journal of the Santa Fe Institute. 1(2) 58-63, 1995; University of Alberta School of Business Research Paper No. 2013-630. Available at SSRN: https://ssrn.com/abstract=2275631

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
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780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
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Belgium

Asian Bureau of Finance and Economic Research ( email )

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1 Business Link
Singapore, 117592
Singapore

Harold J. Morowitz

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

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