Business and Technology Short Read

The Science of Money

Quantum phenomena have long been disregarded by Economic theory. Applications to human behaviour and money could lend themselves nicely.

The quantum revolution in physics was driven by the discovery of subatomic energy transfers, occurring in discrete parcels, known as quanta. Asghar Qadir, a Pakistani mathematical physicist, was one of the first to draw the connection to the study of Economics; his 1978 paper Quantum Economics highlighted the pattern between the ‘the individual as a dynamic entity … and a reactive electron in a closed space’.

Quantum formalism provides a more effective approach to model economic unpredictability and describes how human cognition can be explained through quantum logic. This emerging research field is driven by the thought that the behaviour of financial transactions, and other economic processes, can be studied through an alternative lens. Since Kahneman and Tversky’s notable paper, the economic sphere has been eager to invite new approaches to basic price-equilibrium theory. Neoclassical economics focuses on ‘utility maximisation’ with the caveats of bounded rationality and other behavioural phenomenon but quantum economists emphasise the importance of money movement patterns.

A focus on the concept of money, a largely disregarded aspect of economics, is placed at the centre of quantum economics research as it can be used to model asset bubbles, devalued commodities and other irregular concepts. Following the analogy of quanta, money also moves in discrete steps rather than continuous flows as previously described by traditional models such as the Keynesian ‘Circular Flow of Income .’ This affects our assumptions as we can now accept the vagaries of transactions and look to quantum principles for economic modelling.

Quantum physics models matter with dualistic properties, as described in the notable particle-wave experiment. This feature is also evident in our medium of exchange: money. It is described as possessing real and virtual properties simultaneously; the metal coin represents a value as an object and it also specifies its inscribed virtual value. The misconception between physical and virtual value aide our understanding of economic transactions as we can incorporate these irregularities in our models. Although this dichotomy has been present throughout history, from the use of tally sticks in early China to the adoption of the gold standard, this is significant because the way humans perceive money plays a role in how they interact with other economic agents.

The traditional theory of value associates an increase in value with changes in the supply or necessity of the product. However, this concept also bears some quantum properties. The Copenhagen Experiment concluded that the act of measuring the amplitude of a wave resulted in a change of the length itself; therefore, it became beneficial to use probabilities to predict its location and measurement. This characteristic is seen when assessing the value of an object, as it can only be determined when you partake in an economic transaction, until which a certain amount of time has elapsed.

The role of the conscious observer is also seen to influence the measurement. Recency bias, a phenomenon identified by Kahneman and Tversky, fits precisely with quantum logic as the act of making the decision at a set time, affects the result.

This new quantum form of economics can be used to assess our assumptions of the rational economic man and instead look to a quantum economic person, who is interconnected with other people and possesses an understanding of the intricacies in basic models.

Economics, a field modelled after outdated Newtonian Physics, must continue to evolve.

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