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

Source 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.