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Request Type edit

Request Type: 2010 Funding Priority

2010 Funding Priority: Quantum Physics and the Nature of Reality

Project Information edit

Project title:

A study of the strategic and policy implications of modelling organisations using the Maximum Entropy

Production Principle (MEPP)

Executive Summary:

This project will explore the latest developments in information theory derived from recent work on

thermodynamics, and apply them to management theory and the analysis of organisations. By

modelling and analysing the flows of information and materials through an organisation in a similar way

to how thermodynamics models the entropic effects of energy dispersal, the research will be able to

highlight the range of effective policy choices available to managers and governments as well as to give

probabilities for possible consequences of choices taken.

The project’s activities would output:

1. A number of academic papers to be published in peer reviewed journals.

2. One PhD thesis developing a number of original methods of organisational analysis.

The project’s projected outcomes would be to:

1. Create opportunities for new fields of research.

2. Widen the traditional discourse of management theory and organisational and financial analysis

through the proposition of a quantitative, non-financial method of measuring organisational

performance and efficiency.

3. Provide inter-disciplinary cross-pollination between specialist fields.

Project Description:

The past decade has seen an increasing use of ‘t Hooft’s Holographic Principle when modelling Physics.

One implication of Holography is that our Physical world is really one of reflection of information

conveyed by thermodynamics, such that all fields, forces, motions and potentials are given forth by

entropic differentials in information content bound by energy. As a 2003 article in Scientific American by

Jacob Bekenstein said, “a current trend ... is to regard the physical world as made of information, with

energy and matter as incidentals”. Correspondingly there have been an increasing number of interdisciplinary

papers published in peer-reviewed journals which apply the Maximum Entropy Production

Principle (MEPP), an entropic information theory derived from the 2nd law of thermodynamics by Edwin

T. Jaynes in the 1960s, to a multitude of biological and social science topics.

One angle not extensively quantitatively researched as yet is the organisational policy implications of

these new developments. While organisational complexity scholars (typified by the research of Bill

McKelvey et al) have said much which is very useful, their research is primarily non-quantitative in

nature. Mirroring the call of a recent paper ‘Extreme Events, Power Laws, and Adaptation: Towards an

Econophysics of Organization’ by Boisot and McKelvey (2007), we therefore seek the funding for the

research of the potential quantitative applications of entropic information theory to organisational

analysis.

The Project Leader will be Prof. Arto Annila, Department of Physics, University of Helsinki. He will be

advised by Prof. Vesa Kannianinen, Department of Economic and Political Studies, University of Helsinki.

The project will be assisted by a doctoral student.

Much of the labour in the research will be in an inter-disciplinary search of potential modelling leads by

trying to identify structures in organisations which can be captured into a computer model. MEPP

models generate maximum likelihoods, and the usefulness of such models is highly dependent on the

choice of their assumptions. We intend to employ both top-down and bottom-up modelling, so topdown

would involve conceptualising how some part of an organisation ought to be and testing that

against reality, whereas bottom-up would involve identifying a large source of quantitative data on

social behaviour and trying to extract patterns based on assumptions. We have particular hope for

making novel use of raw data drawn from internet based social networking and search sites, and to

detail the MEPP consequences of fundamentally modifying the core processes in human civilisation.

For example in answering the BQ "What is necessary to change the 'irrational' economic and

psychological patterns that have repeatedly led to asset bubbles, scams, and panics?", we might ask

how would economic stability according to MEPP and the Neo-Classical Economic model be affected if

separate macroeconomic controls (interest rates, money supply etc.) were applied to different uses of

money, such that capital has a separate floating exchange rate currency to revenues (i.e. currency is

demarcated by utility, not by geography)?

In answering the BQ "What kinds of government policies support both private gain and the public good

without damaging either?", we might investigate the MEPP consequences of modifying the rate of flow

of information in an organisation as compared to modifying the truthfulness of that information i.e. how

does quantity and quality of information asymmetries interplay? What happens if an attempt is made to

force the equalisation of disparity versus each actor volunteering to do so?

MEPP models the process of dispersal of quantum information, and through applying it to organisational

analysis we especially advance the BQ "What does quantum information tell us about the nature of

reality?"

If you decide to award us this grant, we intend to deliver as best an answer as we are able.

Project Description Attachment:

Strategic Promise:

1. Within the literature and within wider society, organisations tend primarily to be evaluated in

terms of financial accounting (quantitative), secondarily in strategic effectiveness as perceived by

financial markets (qualitative) and thirdly in terms of some form of corporate social responsibility. This

research could present the beginnings of a fourth method of evaluation.

2. The present structure of the global economy is likely to substantially change as the costs of

portable energy rise, with all the consequences thus implied for the price and supply of food, water and

raw materials – all of which are easily modelled thermodynamically. Therefore this research will be

useful in aiding the optimal handling of declining supplies of essential resources.

3. Given the inter-disciplinary nature of this research, and given the present lack of established

centres of excellence in this particular topic, acquiring funding support from traditional sources is

unlikely without your support.

Capacity for Success:

The University of Helsinki is comfortably within the top one hundred universities of the world both by

peer recognition (=91 according to the QS 2008 World University Rankings) and by research

performance (=72 according to the 2009 Academic Ranking of World Universities compiled by Shanghai

Jiao Tong University). The University of Helsinki belongs to LERU (League of European Research

Universities, http://www.leru.org/).

Prof. Arto Annila is a well known academic within the small international field of quantitative interdisciplinary

thermodynamic analysis. See his publications for more information.

The work of Prof. Vesa Kannianinen is very well known in Scandinavian countries since the 1970s. More

recently his work on public and corporate financing and its inter-relationship with entrepreneurship and

ethics in a macroeconomic context has seen international interest. His publications list is at http://

www.valt.helsinki.fi/blogs/kanniain/ExtendedListOfPublications.pdf.

Expected Outputs:

Expected outputs include:

1. A number of academic papers submitted for peer reviewed publication in some of the

specialisms covered by the research, the content and structure of which to be determined by the

project supervisors.

2. One PhD thesis meeting the required academic standards as set by the Governing Council of

the University of Helsinki.

3. Participation in relevant European conferences (if held during the period of the research).

4. A series of contributions to computer modelling software. These contributions will be made

under open source licensing terms such that anyone may review their assumptions and workings

whether for study or peer review.

Expected Outcomes:

Expected outcomes include:

1. The identification of new and productive areas of research.

2. The proposition of a quantitative, non-financial method of measuring organisational

performance and efficiency.

3. Aiding cross-pollination within the fields of Management Science, Information Science,

Economics, Accounting and theoretical Physics.

The most important outcome is improved understanding. The process of organization within networks/

systems, network/system characteristics (power-laws etc.) as well as identity between information and

free energy are now available from statistical physics of open systems. This is genuinely a new

opportunity to understand, not simply to model economic and social systems. This understanding does

not in every respect meet expectations of predictability, in contrast it clarifies why such reductionist and

deterministic views are not possible.

We think that this is interesting and useful to many people, and these people are our audience.

Currency:

EUR

Request Amount:

49960

Total Project Amount:

100034

Additional Funding from Other Sources:

• Finnish Government Payment of Doctoral Fees = €13,000/year. Total contribution over two

years = €26,000.

• Cost to doctoral student of training in Research Methods = €24,074.

Total funding from other sources: €50,074.

Proposed Project Start Date:

9/1/2011

Proposed Project End Date:

9/1/2013

Relation to Sir John Templeton's Donor Intent:

1. It seeks a deeper understanding of the nature of reality by applying theories from Physics and

Information Science to Organisational Management.

2. Due to its inter-disciplinary nature and lack of established research history, it is highly unlikely

to be supported by conventional funding.

3. It will develop new philosophical insights within Business in relation to advances in scientific

understanding.

4. It brings two highly theoretical and abstract scientific disciplines into a mutually enriching

philosophical discussion with a much wider audience.

5. It will contribute to the understanding of the effectiveness of free markets and

entrepreneurship.

BQs

a. What does quantum information tell us about the nature of reality?

b. What kinds of government policies support both private gain and the public good without

damaging either?

c. What is necessary to change the "irrational" economic and psychological patterns that have

repeatedly led to asset bubbles, scams, and panics?