...As entropy is a measure of disorder or volatility, aren’t we due to deal only with messier and messier situations, meaning that new bubble should be an accumulation of long volatility products? I can draw a lot of parallels with innovation, productivity, or simply family. As time goes, it has become more and more difficult to cross the channel using the Eurostar (probability that you get stuck in the tunnel during a few hours has shifted upward significantly, some say because of bad weather conditions), it has become more and more difficult to fix a broken device (you’d rather buy the new one and you are incentived to do so most of the time)…

As a financial markets analogy, the entropy thought is useful. Remember though that entropy only is guaranteed to increase in a completely closed system. Thus, the universe always increases its entropy, but the sand on a beach is continually sorted into different-sized grains through the action of the waves. The car will keep running rougher unless one takes time to replace the oil and tighten the belts. And the same is certainly true of financial markets.

However, the engineer/physicist will remind us that the apparent decrease in entropy of those systems comes because we aren’t considering the full system. We need to consider how the sorting of sand grains on the beach uses energy from the waves, so that the waves are becoming less-ordered. Daddy is helping organize the family but losing his own sanity. And financial markets are artificially stabilized from time to time, at the cost of the sovereign becoming less ordered.