Quantum economics is an emerging research field which applies methods and ideas from quantum physics to the field of economics. It is motivated by the belief that economic processes such as financial transactions have much in common with quantum processes, and can be appropriately modeled using the quantum formalism. It draws on techniques from the related areas of quantum finance and quantum cognition, and is a sub-field of quantum social science.
A number of economists including Paul Samuelsonand Bernard Schmitt (whose "quantum macroeconomics" treated production as an instantaneous emission ) have found inspiration in quantum theory. Perhaps the first to directly exploit quantum techniques in economic analysis, however, was the Pakistani mathematician Asghar Qadir. In his 1978 paper Quantum Economics, he argued that the formalism of quantum mechanics is the best mathematical framework for modeling situations where "consumer behavior depends on infinitely many factors and that the consumer is not aware of any preference until the matter is brought up." He proposed that, like particles in quantum mechanics, "the individual as an entity ... can be thought of as a point in a Hilbert space."
Qadir's paper received little attention. However, during the 1990s, workers in the field of quantum cognition indeed showed that many aspects of human decision-making, including those involved in economic decisions, seemed to follow a kind of quantum logic.At the same time, researchers such as economist Martin Shubik, physicist Martin Schaden and social scientist Emmanuel Haven were beginning to use the quantum formalism to model the uncertainty of stock markets.
In his 2007 book Quantum Finance: Path Integrals and Hamiltonians for Options and Interest Rates, Belal E. Baaquie showed how methods from quantum physics could be applied to things like the pricing of financial options. However he wrote that the ‘’larger question of applying the formalism and insights of (quantum) physics to economics, and which forms a part of the larger subject of econophysics, is left for future research.’’
In their 2013 book Quantum Social Science, Emmanuel Haven and Andrei Khrennikov extended Baaquie’s work in finance, and showed how quantum techniques could be used to model a number of issues in economics more broadly, such as arbitrage and the reflexivity theory of George Soros.
In a 2016 paperand book (the latter co-authored with journalist Roman Chlupatý), the mathematician David Orrell proposed a quantum theory of money and value, which states that money has dualistic, quantum properties because of the way that it merges the exact concept of number with the fuzzy concept of value. His 2018 book Quantum Economics: The New Science of Money described a quantum economics which combined this view of money with the insights of quantum finance and quantum social science. In a 2019 article for the Bretton Woods Committee, Andrew Sheng wrote that “A quantum paradigm of finance and the economy is slowly emerging, and its nonlinear, complex nature may help the design of a future global economy and financial architecture ... Financial assets and virtual liabilities have quantum characteristics of entanglement with each other that are not yet fully understood."
Just as quantum physics differs in fundamental ways from classical physics, quantum economics differs from neoclassical economics in a number of key respects.
Neoclassical economics is based on expected utility theory, which combines utility theory to model people’s preferences, and probability theory to model expectations under uncertainty. However the field of quantum cognition calls these assumptions into question, since people don’t necessarily have fixed preferences, or base their decisions on probability theory. Many of the findings of behavioral economics are inconsistent with classical logic, but agree with quantum decision theory of the sort assumed in quantum social science.
In financial applications, neoclassical economics is associated with the efficient market theory. As Haven and Khrennikov show, this condition has come under increasing question since the financial crisis, but can easily be relaxed using a quantum formalism.
Neoclassical economics assumes that people act independently while making economic decisions. Quantum economics notes that financial actors are part of an entangled system, as in quantum game theory.
Quantum economics also stresses the importance of financial transactions and in particular the role of money as an active force in the economy, for example in the way that it entangles debtors and creditors through loans.Quantum economics can therefore be viewed as an alternative to neoclassical economics which begins from a different set of assumptions.
Neoclassical economics is an approach to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand. This determination is often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production, in accordance with rational choice theory, a theory that has come under considerable question in recent years.
Statistical physics is a branch of physics that uses methods of probability theory and statistics, and particularly the mathematical tools for dealing with large populations and approximations, in solving physical problems. It can describe a wide variety of fields with an inherently stochastic nature. Its applications include many problems in the fields of physics, biology, chemistry, neuroscience, and even some social sciences, such as sociology and linguistics. Its main purpose is to clarify the properties of matter in aggregate, in terms of physical laws governing atomic motion.
This aims to be a complete article list of economics topics:
Paul Anthony Samuelson was an American economist. The first American to win the Nobel Memorial Prize in Economic Sciences, the Swedish Royal Academies stated, when awarding the prize in 1970, that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory". Economic historian Randall E. Parker has called him the "Father of Modern Economics", and The New York Times considered him to be the "foremost academic economist of the 20th century".
The following outline is provided as an overview of and topical guide to academic disciplines:
Steve Keen is an Australian economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay. Hyman Minsky's financial instability hypothesis forms the main basis of his major contribution to economics which mainly concentrates on mathematical modelling and simulation of financial instability. He is a notable critic of the Australian property bubble, as he sees it.
Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics. Econophysics is closely related to social physics.
Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to heterodox economics, which encompasses various schools or approaches that are only accepted by a minority of economists.
Martin Shubik was an American economist, who was Professor Emeritus of Mathematical Institutional Economics at Yale University.
David John Orrell is a Canadian writer and mathematician. He received his doctorate in mathematics from the University of Oxford. His work in the prediction of complex systems such as the weather, genetics and the economy has been featured in New Scientist, the Financial Times, Adbusters, BBC Radio, Russia-1, and CBC TV. He now conducts research and writes in the areas of systems biology and economics, and runs a mathematical consultancy Systems Forecasting. He is the son of theatre historian and English professor John Orrell.
The neoclassical synthesis, or the neoclassical–Keynesian synthesis, was a post-World War II academic movement in economics that worked towards absorbing the macroeconomic thought of John Maynard Keynes into neoclassical economics. The resultant macroeconomic theories and models are termed neo-Keynesian economics. Mainstream economics is largely dominated by the synthesis, being largely Keynesian in macroeconomics and neoclassical in microeconomics.
The following outline is provided as an overview of and topical guide to economics:
Neo-classical economics has come under critique on the basis of its core ideologies, assumptions, and other matters.
Jean-Philippe Bouchaud is a French physicist. He is founder and Chairman of Capital Fund Management (CFM), professor of physics at École polytechnique and co-director of the CFM-Imperial Institute of Quantitative Finance at Imperial College London. He is a member of the French Academy of Sciences.
Quantum cognition is an emerging field which applies the mathematical formalism of quantum theory to model cognitive phenomena such as information processing by the human brain, language, decision making, human memory, concepts and conceptual reasoning, human judgment, and perception. The field clearly distinguishes itself from the quantum mind as it is not reliant on the hypothesis that there is something micro-physical quantum mechanical about the brain. Quantum cognition is based on the quantum-like paradigm or generalized quantum paradigm or quantum structure paradigm that information processing by complex systems such as the brain, taking into account contextual dependence of information and probabilistic reasoning, can be mathematically described in the framework of quantum information and quantum probability theory.
Quantum finance is an interdisciplinary research field, applying theories and methods developed by quantum physicists and economists in order to solve problems in finance. It is a branch of econophysics.
Diederik Aerts is a Belgian theoretical physicist and a professor at Brussels Free University, where he directs the Center Leo Apostel for Interdisciplinary Studies (CLEA).
Physics of financial markets is a discipline that studies financial markets from the perspective of physics. It seeks to understand the nature of financial processes and phenomena by employing the scientific method and avoiding beliefs, unverifiable assumptions and immeasurable notions, not uncommon to finance and economic disciplines. Physics of financial markets addresses issues such issues as theory of price formation, price dynamics, market ergodicity, collective phenomena, time cycles, self-action, and market instabilities. Physics of financial markets should not be confused for quantitative finance and econophysics, which are only concerned with modeling financial instruments without seeking to understand nature of underlying processes.
Quantum social science is an emerging field of interdisciplinary research which draws parallels between quantum physics and the social sciences. Although there is no settled consensus on a single approach, a unifying theme is that, while the social sciences have long modelled themselves on mechanistic science, they can learn much from quantum ideas such as complementarity and entanglement. Some authors are motivated by quantum mind theories that the brain, and therefore human interactions, are literally based on quantum processes, while others are more interested in taking advantage of the quantum toolkit to simulate social behaviours which elude classical treatment. Quantum ideas have been particularly influential in psychology, but are starting to affect other areas such as international relations and diplomacy in what one 2018 paper called a "quantum turn in the social sciences".