Entropy (Basel)
November 2020
Information theory, and the concept of information channel, allows us to calculate the mutual information between the source (input) and the receiver (output), both represented by probability distributions over their possible states. In this paper, we use the theory behind the information channel to provide an enhanced interpretation to a Social Accounting Matrix (SAM), a square matrix whose columns and rows present the expenditure and receipt accounts of economic actors. Under our interpretation, the SAM's coefficients, which, conceptually, can be viewed as a Markov chain, can be interpreted as an information channel, allowing us to optimize the desired level of aggregation within the SAM.
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