Economic Cycles and the Thermodynamic Uncertainty Relations

Abstract

In the century and a half since Maxwell first conjured his “finite being” which Lord Kelvin subsequently dubbed a “daemon”, researchers have explored the connections between non-equilibrium thermodynamics, entropy, and information theory. In recent years various Thermodynamic Uncertainty Relations (TURs) have been derived to inform upon the relationship between the entropy production and the precision possible in thermodynamic machines and processes. In this paper the recently derived TURs are applied to the hypothetical thermodynamic economy as described by Parker [1]. The TURs define the lower bound on the total entropy pro-duction of the economy. Changes in this entropy production rate has consequences on the stability of the economic system and plays a central role in the business cycle. This new perspective has important implications for policy makers, researchers, and other economic actors.

Keywords: Entropy, Landauer’s Principle, Multiscale Entropic Lifecycle, Thermodynamic Uncertainty Relations, TURs, Entropic Yield Curve, Business Cycle

JEL Classification: E32, E37, E43, E47, O33, C22, C53, E17, G12