Time's Barbed Arrow: Irreversibility, Crypticity, and Stored Information

We show why the amount of information communicated between the past and future--the excess entropy--is not in general the amount of information stored in the present--the statistical complexity. This is a puzzle, and a long-standing one, since the latter is what is required for optimal prediction, but the former describes observed behavior. We layout a classification scheme for dynamical systems and stochastic processes that determines when these two quantities are the same or different. We do this by developing closed-form expressions for the excess entropy in terms of optimal causal predictors and retrodictors--the epsilon-machines of computational mechanics. A process's causal irreversibility and crypticity are key determining properties.