  Is the dynamical evolution of physical systems objectively a manifestation of
information processing by the universe? We find that an affirmative answer has
important consequences for the measurement problem. In particular, we calculate
the amount of quantum information processing involved in the evolution of
physical systems, assuming a finite degree of fine-graining of Hilbert space.
This assumption is shown to imply that there is a finite capacity to sustain
the immense entanglement that measurement entails. When this capacity is
overwhelmed, the system's unitary evolution becomes computationally unstable
and the system suffers an information transition (`collapse'). Classical
behaviour arises from the rapid cycles of unitary evolution and information
transitions.
  Thus, the fine-graining of Hilbert space determines the location of the
`Heisenberg cut', the mesoscopic threshold separating the microscopic, quantum
system from the macroscopic, classical environment. The model can be viewed as
a probablistic complement to decoherence, that completes the measurement
process by turning decohered improper mixtures of states into proper mixtures.
It is shown to provide a natural resolution to the measurement problem and the
basis problem.
