Entropy

Francesco Parisi

Entropy refers to the second law of thermodynamics, according to which every process that can occur spontaneously will go in one direction only and will result in a release of energy that cannot be recaptured, so that the amount of entropy in the universe will continually increase. In the property context, entropy induces a onedirectional bias, which leads toward increasing property fragmentation. Building upon the recent literature on property fragmentation, this entry will consider whether property is indeed subject to the law of entropy. The law of entropy further indicates that only in the purely abstract case of (both internally and externally) reversible transformations will the overall net change in entropy be zero. In the property context, this indicates that only in a world of zero transaction costs would there be no such tendency toward fragmentation. The economic forces that induce entropy in property are quite straightforward. Michael Heller cites ...

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