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Foundations of Economic Evolution

A Treatise on the Natural Philosophy of Economics

  • New Horizons in Institutional and Evolutionary Economics series

Carsten Herrmann-Pillath

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Chapter 2: Causation

Carsten Herrmann-Pillath


In this chapter I will further explore the idea of a physics of knowledge as the foundation of the theory of economic evolution. For this it is necessary to explore the notion of causation in more detail, in two senses; one is the question of the directionality of causal changes, the other is the role of regularities in causation. This requires elucidating the relationship between energy and knowledge. The relationship between energy and knowledge is straightforward from the perspective of Natural Philosophy: Ontologically, ‘energy’ can be defined as a potential for change entities have relative to a reference frame (Bunge 1977: 240); knowledge refers to the set of regularities that are manifest in these changes. The core theoretical concept linking both notions is ‘entropy’. This is because entropy has two formally homologous interpretations, one in Phenomenological Thermodynamics and one in Information Theory, with Statistical Mechanics bridging the two via the famous Boltzmann formula. There is a deep physical and hence ontological relationship between energy, entropy and information, that is knowledge.

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