Quantum Economics

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A decade after the financial crisis, there is a growing consensus that the neoclassical approach to economics has failed, and that new approaches are needed. This paper argues that economics has been trying to solve the wrong problem. Economics sees itself as the science of scarcity, but instead it should be the science of money. Just as physicists’ ideas about quantum matter were formed by studying the exchange of particles at the subatomic level, so economics should begin by analysing the properties of money-based transactions, which like quantum entities have a fundamentally dualistic nature. By building on ideas from quantum money, quantum finance, and quantum social science, the paper shows that the economy is an archetypal example of a quantum social system, complete with its own versions of measurement uncertainty, entanglement, and so on. This leads to a proposal for a quantum economics, which is to neoclassical economics what quantum physics is to classical physics.

Posted for comments on 20 Oct 2017, 2:11 pm.

Comments (3)

  • Valerian Popkov says:

    The Serbian scientist M. Petrovich (written in French) published in Paris a book Mecanismes Communs aux phenomenes disparates. Nouwelle Collection Scientifique. (Paris, 1921). (See also review by André Lalande (Revue Philosophique de la France T. 95 (JANVIER A JUIN 1923), pp. 299-302). Petrovich caught in the common scientific, heuristic and monistic value the theory of analogy. In particular, he argued that common mechanisms of heterogeneous phenomena lead to the concept of analogies of whole groups of phenomena. Common features in each such group constitute its “analogical core”, or “core group”. It is true that the core group in the Quantum economy is money. It is also true that “money occupies a special place in the intersection between the world of real objects and ideas of social value, its dualistic properties are experienced by society as a whole” (see Orrell, D. (2016). A quantum theory of money and value. Economic Thought, 5(2), 19-36. But there is a logical aspect of duality. Today everything is built on a logical system belongs either to logic contradictory relations or logic contrary relations. Recall that contradictory opposition is incompatible concept between which no middle-intermediate concepts and which completely exclude each other (e.g. black and white). Contrary concept is also incompatible concepts, but between which there may be some intermediate concept (e.g., between white and black can exist grey). Two types of relations (contradictory and contrary) corresponds to two types of logic, namely sets of the discrete type corresponds to the logic contradictory relations, and sets continuous type logic are contrary relations. In the ordinary perception of the world around us is represented as a set of individual (discrete) objects (things) that are separated in space, pronounced borders. But this psychophysical error. Real world around us is a constantly changing world, it’s a world of continuous processes. What type of logic should be used when considering money? Without a doubt, money is discrete sort of social reality. Generally speaking, to describe the objects in the continuous world by discrete system means deliberately to fall into error. But this error is largely offset by the fact that continuous real-world objects are assigned to discrete values and money. Money is penetrating in such objects (goods and services) can easily to connect continuous with discrete (leave out braсkets the question – is it always possible to adequately make this connection). So, money is the unique means of discrete – continuous type, allowing to work in two spaces – discrete and continuous.

  • Michael Schnabel says:

    In this lucid and very clearly written article David Orrell provides a short overview about a new branch of economics, called quantum economics, and particularly emphasizes the point that we may have to reassess our understanding of money and look deeper into the money creating process in order to reduce the likelihood of financial bubbles and economic crises to form in the future.

    Of course, one can arrive to a similar conclusion without invoking quantum theory. However the quantum theoretical framework may provide a better toolbox for dealing with the features that are characteristic for complex systems such as self-referentiality and interdependence. Quantum physics was established once physicists realized that the observer could never be fully separated from the observed and that the act of measuring the state of a system would feed back and thereby affect the system. Furthermore, observation of one part of a system could have immediate implications for the possible outcomes at distant, not directly connected parts of the system – an interdependence known as (quantum) entanglement.

    In this paper David Orrell describes in a convincing manner where to retrieve the equivalent concepts from quantum mechanics in the part of economics that is dealing with the pricing of assets and the money system itself, notably the credit sector and the way money is created “out of nothing” by the central banks. He argues that the traditional economical models rooted in neoclassical approach that has its analogy in classical mechanics is inadequate to describe the complexity of economical systems and therefore may actually do more harm than good by providing a false sense of security and shallow understanding. I couldn’t agree more with him on that point!

    As already mentioned, the paper in its current form is very clearly written with little room left for improvement. A minor point would be the following: At several (2?) places in the manuscript the statement is made that “quantities such as position or momentum can never be known exactly”. This is not quite correct. It should read: “complementary variables such as position or momentum can never be known exactly at the same time”. Position or momentum, independently, can be determined up to (in principle) arbitrary precision, however measurement of position and momentum don’t commute and would therefore interfere with each other.

    • David Orrell says:

      Thanks very much to the reviewer Michael Schnabel for these comments and generous remarks, and for spotting the needed corrections which I will make in a revised version of the manuscript.

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