Has the time come for a quantum revolution in economics?

[C C]

https://aeon.co/essays/has-the-time-come...-economics

EXCERPT: . . . Indeed, in recent years there have been many calls for economics to reinvent itself [...] But progress has been slow [...] One problem is that, while there have been many demands for a revolution, the exact nature of the revolution is less clear. Critics agree that the foundations of economics are rotten, but there are different views on what should be built in its place. [...] But what if the problems with economics run even deeper? What if the traditional approach has hit a wall, and the field needs to be completely reinvented? What if, as with 19th-century physics, the problem comes down to ontology – our entire way of thinking and talking about the economy? And what if the metaphorical piece of lead piping that mugged both physics and economics was in each case exactly the same thing – namely, quantum reality?

[...] To sum up, the key tenets of mainstream or neoclassical economics – including such things as ‘utility’ or ‘demand curves’ or ‘rational economic man’ – are just made-up inventions, no more real than the crystalline spheres that Medieval astronomers thought suspended the planets. But real things like money are to a remarkable extent ignored.

In physics, the quantum revolution was born when physicists found that at the subatomic level energy was always exchanged in terms of discrete parcels, which they called quanta, from the Latin for ‘how much’. Perhaps we need to follow the quantum lead, and look at transactions between people. In economics, the equivalent would be exchanges of money – like when you go into a shop, point at something, and ask: How much? Or, if you’re in Italy, Quanto?, which makes the connection a little clearer.

Of course, the money objects we use in exchange, such as coins, might not seem to resemble subatomic objects. But look a little harder, and the fields of economics and quantum physics have much in common.

The most basic insight of quantum physics was that matter or energy does not move continuously, but is transmitted in discrete, sudden jumps. Money, of course, is the same – there isn’t a little needle showing the money draining out of your account when you make a payment, it just goes in a single step. And as a Bank of England paper noted in 2015, one reason the money-creation process is hard to accommodate in traditional models is that it works ‘instantaneously and discontinuously’ (their emphasis) rather like the creation of quantum particles out of the void.

In quantum physics, attributes such as position or momentum are fundamentally indeterminate until measured, and according to the uncertainty principle cannot be known beyond a certain precision. Similarly, money’s use in transactions is a way of attaching a number (the price) to the fuzzy and indeterminate notion of value, and therefore acts as a kind of quantum measurement process. When you sell your house, you don’t know exactly how much it is worth or what it will fetch; the price is revealed only at the time of transaction.

One of the more mysterious aspects of quantum physics is that particles can become entangled so that they become a unified system, and a measurement on one affects the other instantaneously. In economics, the information encoded in money is a kind of entanglement device, because its creation always has two sides, debt and credit (for example modern fiat money represents government debt). And its use entangles people with each other and with the system as a whole, as anyone with a loan will know. If you go bankrupt, that immediately affects the state of your creditors, even if they don’t find out straight away.

According to quantum physics, matter is fundamentally dualistic in the sense that it is composed, not of independent, billiard ball-like atoms, but of entities that behave in some ways as ‘virtual’ waves, and in other ways as ‘real’ particles. Neither the particle nor the wave description is complete by itself. This sounds confusing – but the same can be said of money, which is also real and virtual at the same time. For example, a coin is made by pressing a stamp into a metal slug. The stamp specifies the numeric value of the coin, while the metal represents its value as an object that can be owned or exchanged. It therefore lives partly in the virtual world of numbers and mathematics, and partly in the physical world of things and people and value, which is one reason for its perplexing effects on the human psyche....

MORE: https://aeon.co/essays/has-the-time-come...-economics

[Syne]

Keynesian economists grasping at straws.

[Yazata]

Indeed, in recent years there have been many calls for economics to reinvent itself [...] But progress has been slow [...] One problem is that, while there have been many demands for a revolution, the exact nature of the revolution is less clear.

Right, that's the problem. I don't know a whole lot about economics, despite having taken Macro- and Micro- back in the day. But my sense is that supply and demand are pretty solid. I'm reasonably confident about some other parts as well.

Unfortunately, the economy (society as a whole described quantitatively in terms of its interactions) is hugely complex. Trying to understand it as something analogous to classical physics with "laws" of money flow or whatever is obviously hideously simplistic. It simply doesn't work. Even trying to understand it in terms of game-theory played by a set of hypothetical actors who all behave rationally and all have access to the same information produces unrealistic models that aren't all that useful for making predictions. But treating each actor as a unique individual playing by his/her own rules to maximize goals that might be unique to the particular individual makes the whole thing far too complex.

Critics agree that the foundations of economics are rotten, but there are different views on what should be built in its place.

I'm not convinced that the foundations are rotten. The problem is that so many simplifying assumptions are built in that economics doesn't really succeed in playing the kind of role that economists are called upon to play. We still aren't in a position to engineer prosperity top-down, no matter how many economics Ph.Ds from prestige universities we hire.

But what if the problems with economics run even deeper? What if the traditional approach has hit a wall, and the field needs to be completely reinvented? What if, as with 19th-century physics, the problem comes down to ontology – our entire way of thinking and talking about the economy? And what if the metaphorical piece of lead piping that mugged both physics and economics was in each case exactly the same thing – namely, quantum reality?

Whenever a layperson uses the word "quantum", one can be reasonably certain that what follows will mostly be bullshit.

It's a bad analogy. Even in quantum mechanics there are still relatively simple mathematical formulations that describe what's happening. (Schroedinger's equation etc.) It's just that some of the predictions of what's happening result in probabilities of various results while others are exceedingly counterintuitive when we try to interpret them in terms of the physical behavior of everyday objects. But the point is that there's still a relatively simple mathematical structure underlying everything that allows the physicists to predict observational outcomes.

I'm not convinced that kind of simple mathematical structure exists in most of the areas of interest to the so-called "social sciences". I'm skeptical that we will ever be able to scrawl the basic principles of economics (or sociology or history) on a chalkboard as theoretical physicists do with theirs. (Mainly because those kind of equations likely don't exist.)

[C C]