An Entropy Theory of Value

23 Pages Posted: 24 May 2002

See all articles by Jing Chen

Jing Chen

University of Northern British Columbia - School of Business

Date Written: April 2002


More than half century ago, Shannon's identification of information as the reduction of entropy greatly clarified the meaning of information and established information theory as a science. Since all human activities represent extraction and transformation of low entropy from the environment, it is natural to relate economic value to low entropy. However, some conceptual difficulties prevented the development of an entropy theory of value. In this work, we identify economic value as the reduction of entropy mathematically and explore the relation between physical entropy and economic value. In the process, we show how the detailed investigation of information theory, thermodynamic theory and the theory of evolution resolves the conceptual difficulties that confound us for many years. The entropy theory of value, by establishing the theory of value on the firm foundation of thermodynamics, greatly clarified many fundamental issues in economic theory and human activities.

Keywords: value, entropy, information

JEL Classification: A10, B41, D80, Q40

Suggested Citation

Chen, Jing, An Entropy Theory of Value (April 2002). Available at SSRN: or

Jing Chen (Contact Author)

University of Northern British Columbia - School of Business ( email )

Prince George, BC, V2N 4Z9
250-960-6480 (Phone)
250-960-5544 (Fax)


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