The Signal and the Birth of the Digital Economy

Abstract

This paper provides a nonmathematical introduction to the US economy’s information processing ratio (R/C). This measure derived by Parker (2016-2019), was utilized to study the emergence of flash crashes, the evolution of the business cycle, and to provide an important new link connecting the branches of finance. In this short article R/C is intuitively introduced, its connection to the rise of the digital economy is explained, and its cyclical behavior and historical evolution are examined.

Keywords: Business Cycle, Bear Market, Bull Market, Digital Economy, Digitalization, Analog, Signal Processing, Information Theory, Entropy, Claude Shannon

JEL Classification: C22, C88, D80, D83, E3, E32, E37, G14, O30, O33