Thermodynamics as a theory of decision-making with information-processing costs

Thermodynamics as a theory of decision-making with information-processing costs. Braun, D. A & Ortega, P. A

Perfectly rational decision-makers maximize expected utility, but crucially ignore the resource costs incurred when determining optimal actions. Here, we propose a thermodynamically inspired formalization of bounded rational decision-making where information processing is modelled as state changes in thermodynamic systems that can be quantified by differences in free energy. By optimizing a free energy, bounded rational decision-makers trade off expected utility gains and information-processing costs measured by the relative entropy. As a result, the bounded rational decision-making problem can be rephrased in terms of well-known variational principles from statistical physics. In the limit when computational costs are ignored, the maximum expected utility principle is recovered. We discuss links to existing decision-making frameworks and applications to human decision-making experiments that are at odds with expected utility theory. Since most of the mathematical machinery can be borrowed from statistical physics, the main contribution is to re-interpret the formalism of thermodynamic free-energy differences in terms of bounded rational decision-making and to discuss its relationship to human decision-making experiments.

@article{Braun,
abstract = {Perfectly rational decision-makers maximize expected utility, but crucially ignore the resource costs incurred when determining optimal actions. Here, we propose a thermodynamically inspired formalization of bounded rational decision-making where information processing is modelled as state changes in thermodynamic systems that can be quantified by differences in free energy. By optimizing a free energy, bounded rational decision-makers trade off expected utility gains and information-processing costs measured by the relative entropy. As a result, the bounded rational decision-making problem can be rephrased in terms of well-known variational principles from statistical physics. In the limit when computational costs are ignored, the maximum expected utility principle is recovered. We discuss links to existing decision-making frameworks and applications to human decision-making experiments that are at odds with expected utility theory. Since most of the mathematical machinery can be borrowed from statistical physics, the main contribution is to re-interpret the formalism of thermodynamic free-energy differences in terms of bounded rational decision-making and to discuss its relationship to human decision-making experiments.},
author = {Braun, Daniel A and Ortega, Pedro A},
doi = {10.1098/rspa.2012.0683},
file = {:Users/brekels/Documents/Mendeley Desktop/Thermodynamics as a theory of decision-making with information-processing costs - Braun, Ortega.pdf:pdf},
keywords = {Subject Areas,biomedical engineering,biophysics Keywords,bounded rationality,computational biology,decision-making,information processing},
title = {{Thermodynamics as a theory of decision-making with information-processing costs}},
url = {http://dx.doi.org/10.1098/rspa.2012.0683}
}

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