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Characterization of the probability and information entropy of a process with an increasing sample space by different functional forms of expansion, with an application to hyperinflation

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  • Laurence Francis Lacey

    (Lacey Solutions Ltd., Skerries, County Dublin, Ireland)

Abstract

There is a random variable (X) with a determined outcome (i.e., X = x0), p(x0) = 1. Consider x0 to have a discrete uniform distribution over the integer interval [1, s], where the size of the sample space (s) = 1, in the initial state, such that p(x0) = 1. What is the probability of x0 and the associated information entropy (H), as s increases by means of different functional forms of expansion? Such a process has been characterised in the case of (1) a mono-exponential expansion of the sample space; (2) a power function expansion; (3) double exponential expansion. The double exponential expansion of the sample space with time (from a natural log relationship between t and n) describes a "hyperinflationary" process. Over the period from the middle of 1920 to the end of 1923, the purchasing power of the Weimar Republic paper Mark to purchase one gold Mark became close to zero (1 paper Mark = 10 to the power of -12 gold Mark). From the purchasing power of the paper Mark to purchase one gold Mark, the information entropy of this hyperinflationary process was determined.

Suggested Citation

  • Laurence Francis Lacey, 2021. "Characterization of the probability and information entropy of a process with an increasing sample space by different functional forms of expansion, with an application to hyperinflation," Papers 2107.05483, arXiv.org.
  • Handle: RePEc:arx:papers:2107.05483
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    File URL: http://arxiv.org/pdf/2107.05483
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    Cited by:

    1. Laurence Francis Lacey, 2022. "Macroeconomic evaluation of the growth of the UK economy over the period 2000 to 2019," Papers 2212.03947, arXiv.org.
    2. Laurence Francis Lacey, 2021. "On the nature of monetary and price inflation and hyperinflation," Papers 2109.12980, arXiv.org.

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