  A distinctive property of human and animal intelligence is the ability to
form abstractions by neglecting irrelevant information which allows to separate
structure from noise. From an information theoretic point of view abstractions
are desirable because they allow for very efficient information processing. In
artificial systems abstractions are often implemented through computationally
costly formations of groups or clusters. In this work we establish the relation
between the free-energy framework for decision making and rate-distortion
theory and demonstrate how the application of rate-distortion for
decision-making leads to the emergence of abstractions. We argue that
abstractions are induced due to a limit in information processing capacity.
