Econophysics and the Landauer Principle: A Redefinition of Economic Temperature

A redefinition of key notions in econophysics based on the Landauer principle is proposed. Marginal economic temperature is defined via the economic Landauer principle and is proportional to the minimal monetary cost associated with erasing or transmitting one bit of information in a given economic system. The actual economic temperature is defined as the effective monetary cost per irreversibly processed bit in a given economic system. The introduced definitions are particularly relevant for high-frequency trading environments. The Clausius formulation of the Second Law is reformulated for economic systems as the statement that money cannot spontaneously flow from a colder economic subsystem to a hotter one. Economic analogues of Carnot and Szilard engines are analyzed. The Carathéodory formulation of the Second Law is reformulated as follows: in every neighborhood of any equilibrium economic state there exist states that cannot be reached by processes that do not expend money or information. An optimal-power Curzon–Ahlborn economic engine is discussed. Illustrative examples of the introduced economic temperature are provided. Finally, a redefinition of economic entropy based on information processing is proposed. First and Third Laws of economic thermodynamics are proposed.