The US Economy’s Information Processing Ratio (R/C) and Fractal Zooming

Abstract

The US economy’s information processing ratio (R/C) was derived by Parker (2016-2019) 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 paper the evolution of the R/C ratio over the business cycle is studied from the perspective of fractal mathematics. The R/C curve itself is found to have a fractal structure. From this perspective a novel analysis of information processing capacity changes over the business cycles is presented. A given technology or set of technologies ultimately offers diminishing returns in the processing of information. The diminishing returns of state of the art processes are reflected in the rise and fall of the economy’s R/C ratio through a process described as fractal zooming.

Keywords: Fractal, Fractal Zooming, Information processing, entropy, entropic yield curve, Weierstrass-Mandelbrot function, Self-similar, Flash Crash