The Work Capacity of Channels with Memory: Maximum Extractable Work in Percept-Action Loops

Predicting future observations plays a central role in machine learning, biology, economics, and many other fields. It lies at the heart of organizational principles such as the variational free energy principle and has even been shown -- based on the second law of thermodynamics -- to be necessary for reaching the fundamental energetic limits of sequential information processing. While the usefulness of the predictive paradigm is undisputed, complex adaptive systems that interact with their environment are more than just predictive machines: they have the power to act upon their environment and cause change. In this work, we develop a framework to analyze the thermodynamics of information processing in percept-action loops -- a model of agent-environment interaction -- allowing us to investigate the thermodynamic implications of actions and percepts on equal footing. To this end, we introduce the concept of work capacity -- the maximum rate at which an agent can expect to extract work from its environment. Our results reveal that neither of two previously established design principles for work-efficient agents -- maximizing predictive power and forgetting past actions -- remains optimal in environments where actions have observable consequences. Instead, a trade-off emerges: work-efficient agents must balance prediction and forgetting, as remembering past actions can reduce the available free energy. This highlights a fundamental departure from the thermodynamics of passive observation, suggesting that prediction and energy efficiency may be at odds in active learning systems.