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Maxwell's Demon, by James Sogi
In 1871 in his book Theory of Heat, James Maxwell, who created the formula for electricity and magnetism, posed the issue of the relationship between information, entropy and work in a thought experiment that came to be called Maxwell's Demon. Maxwell wondered whether intelligence could overcome the second law of thermodynamics, and the tendency towards maximum entropy, the tendency for steam engines to lose efficiency, [and for the stock markets to wander unpredictably and randomly]. His point was that the laws of entropy aren't physical, but rather statistical.
Take two gas chambers connected by a small tube. Pump one full. soon the gas will equalize and no more work can be gained. Maxwell wondered whether and intelligent being in the middle could let only the molecules speeding thorough in one direction, until one chamber was full again , and able to perform work. thus defeating entropy by intelligence: a free supply fueled by randomness, and organized by intelligence. The notion of dissipated energy would not occur to a being who could not turn any of the energies of nature to his own account. Of course the demon could record the patterns of the passage of the molecules and runs statistical tests to determine whether the flow of molecules was in fact random, or whether some unknown outside forces, such as external heat may be affecting the system and then only open the gate at the times when his statistical studies showed that the flow was more highly probable to flowing in the proper direction for accumulating gas in one chamber, or for traders accumulating profits in your own account not someone else's.
In 1961 Rolf Landaur at IBM posited that the act of accumulating and computing information, and its storage off set any gains for Maxwell's demon. In the '70s Charles Bennett wondered what happens if you don't erase the information gathered, and that it was the erasure of the information in the computer that generated the waste heat that caused inefficiency in the system. .
The market is an information gathering and computing machine. It flows in two directions. Its advantage is that the information is never erased. The cost is the overhead and vig. Like Maxwell's demon astute market counters can overcome the laws of entropy, the overhead and vig and through intelligence accumulate stored energy in the form of money in their containers even though it may appear random to other less astute observers.
Acknowledgment to Tom Ryan for mentioning Johnson, Fire in the Mind.