Classical economic models are predicated on the idea that the ultimate aim of choice is to maximize utility or reward. In contrast, an alternative perspective highlights the fact that adaptive behavior requires agents' to model their environment and minimize surprise about the states they frequent. We propose that choice behavior can be more accurately accounted for by surprise minimization com...

The high pay packages of U.S. CEOs have raised serious concerns about what would constitute a fair pay. Since the present economic models do not adequately address this fundamental question, we propose a new theory based on statistical mechanics and information theory. We use the principle of maximum entropy to show that the maximally fair pay distribution is lognormal under ideal conditions. T...

Econophysics, is based on the premise that some ideas and methods from physics can be applied to economic situations. We intend to show in this paper how a physics concept such as entropy can be applied to an economic problem. In so doing, we demonstrate how information in the form of observable data and moment constraints are introduced into the method of Maximum relative Entropy (MrE). A gene...

Classical economics was built largely on the analogy to mechanics, as it was known in the time of Adam Smith; particularly the idea of mechanical equilibrium. But a macroeconomic system is in some ways more like a thermodynamic system than a mechanical one, so we develop that analogy. Since the time of J. Willard Gibbs it has been known that prediction of chemical processes { reversible or irre...

Exponential distribution is ubiquitous in the framework of multi-agent systems. Usually, it appears as an equilibrium state in the asymptotic time evolution of statistical systems. It has been explained from very different perspectives. In statistical physics, it is obtained from the principle of maximum entropy [1]. In the same context, it can also be derived without any consideration about in...

the mechanical aspect of entropy-exergy relationship, together with the thermal aspect usually consid-ered, leads to an extended formulation of physical exergy based on both maximum useful work and maximum useful heat that are the outcome of available energy of a thermodynamic system. this approach suggests that a mechanical entropy can be studied, in addition to the already used thermal entrop...

The reliability of a communications network is often evaluated without taking into account the economic consequence of failures. Here a new approach is proposed to assess the economic consequences of failures as a figure of merit of reliable networks. For this purpose a partition of the network operator’s market into service basins is proposed, which includes the presence of correlation between...