As many readers will know, I was birdwatching at the weekend, with two nights spent away at Snape, in Suffolk.
Amongst the matters discussed between kingfishers, and other delights, was quantum theory, which is something my wife is exploring in some depth right now. She referred to David Orrell's book on Quantum Economics.
This subject came up again today in the context of Pie Theory, which Jacqueline thought related to the issue because I was discussing the size of the slice of pie that people got, and in Latin, quantum means 'how much' or 'how great', which is precisely the question I was asking.
The following discussion of quantum economics flows from these conversations and reflects our current understanding. I should add we used AI to help develop some of that thinking, although by no means entirely, and in itself that is a quantum process, because we used feedback loops to ensure we made progress.
First, quantum economics is not about applying physics equations to GDP forecasts. Orrell does not claim, for example, that electrons behave like consumers. The point is much more subtle than that. Just as quantum mechanics revolutionised physics by recognising uncertainty, duality and entanglement, so economics may need its own quantum turn that acknowledges that real-world economic behaviour doesn't conform to neat, mechanistic models.
Second, this perspective appears to take money seriously. Both neoclassical and neoliberal economics assume that money is just a tool that is neutral in the long run, facilitating exchange but otherwise having no deeper significance. That is not true. Money is not neutral. It is created by banks, lent into existence, distributed unequally, and is capable of reshaping the economy at every level. As a result, it matters who creates it, who controls it, and how it is spent.
Third, quantum economics proposes that economic actors do not behave like rational automatons. People are influenced by context, by emotion, by narratives and expectations. They do not optimise; they muddle through. In quantum terms, their decisions are at best probabilistic and not deterministic. There are multiple possible futures, and which one we get depends not just on “facts” but on choices, perceptions and social interactions which we cannot predict.
Fourth, just as the observer in quantum physics changes the observed system, so economic measurement of inflation, growth, and debt, for example, is not passive. Those measures shape expectations, policy, and behaviour. The economy is not an object to be studied from outside; it is a system we are all entangled in. That is where feedback loops come into play.
Fifth, quantum theory necessarily embraces time, and one of the significant objectives of many current economic models is to eliminate its impact from view. This means that they overlook a crucial dynamic that plays an essential role in shaping economic understanding. It is not just wrong to seek to eliminate time from view; embracing it as an element in the process of creating perceptions of reality is essential. How else can flows make sense?
Profound implications appear to flow from this.
First, all economic models that assume certainty, optimisation and neutrality are inadequate. They are, to use my own phrase, completely rubbish approximations to the truth. The failure of orthodox economics during the financial crisis and the pandemic ought to have made that obvious.
Second, money must be placed at the centre of economic theory, not on the margins. We must understand how it is created, allocated, and used, not as an afterthought, but as a primary driver of outcomes. That is why modern monetary theory, despite its critics, has far more explanatory power than traditional macroeconomics. This is also why tax, as the corollary of money creation, and to some extent its necessary inverse, is also so economically important.
Third, inequality, power and narrative must be part of our economic analysis. Quantum economics makes clear that economic systems are not value-free. They are entangled with law, politics, and psychology. To pretend otherwise is not just naive, it is dangerous.
Fourth, quantum thinking allows us to move beyond thinking about a binary relationship between markets and the state. Instead, it opens space to think in systems, in complementarities, and in feedback loops. That is essential if we are to tackle climate change, demographic shifts, and the restructuring of the global economy.
Fifth, this approach also supports a new politics of care. If people are not rational utility-maximisers but are instead context-sensitive beings, then the role of the state is not to leave them alone but to shape possibilities. In other words, the state must provide security, opportunity and meaning.
To be clear, I do not think quantum economics, as I now understand it, is a magic bullet. It is, as yet, more metaphor than method. But metaphors matter. They shape the way we see the world—and right now, the metaphors of mainstream economics are broken. We need new tools. We need a new language. And we need an economics that begins not from equations, but from the complexity of human life. If that means thinking quantum, so be it.
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I like this.
The little understanding that I have of quantum physics has been gained by reading a theologian/scientist, and it made my brain hurt even more than reading good theology!
But your analogy is a good (and of course, imperfect one). It raises the question of “Newtonian economics” which works in ordinary life, at low speed, and on a domestic scale, but is an inadequate model when talking about nations and governments.
Apply that to the infamous Thatcher “household analogy” – which is obviously “Newtonian economics”, it works for small distances and low speeds, and short timescales but is useless for national economies with central banks and fiat currencies, where things function “above the speed of light” (not literally of course with respect to BoE interest rate policy) and the basic Newtonian rules break down and even time and space start “misbehaving”.
Using Newtonian physics to make calculations about black holes simply doesn’t work.
Using Newtonian economics to make calculations about national scale so-called economic black holes, doesn’t work either, and even worse, it kills people on a very large scale, tens of millions, through poverty, austerity, climate and planetary destruction, and resource depletion.
Thanks
EXCELLENT post!
Thanks
Neo-liberalism has a history of absurdist reductionism in it – it has stripped out all the real and existing nuances and dynamics of the real economy and left us with what is really a how to get rich quick scheme – essentially, to ignore everyone else’s needs and focus on the money orientated goals.
The quantum approach offers us the intellectual opportunity to put the complexity back, acknowledge the relationships and also acknowledge money for what it is, something created and controlled here on earth, not in heaven or some other ‘unseen hand’.
Thank for this post.
I asked Claude to compare quantum economics with entropy economics and this is what it gave me.
Key Comparisons
Philosophical Approach:
Quantum Economics: Emphasizes uncertainty, behavioral aspects, and the probabilistic nature of economic phenomena
Entropy Economics: Focuses on energy flows, material constraints, and the inevitable tendency toward disorder/equilibrium
Methodological Focus:
Quantum Economics: Borrows mathematical frameworks from quantum mechanics to model decision-making and financial instruments
Entropy Economics: Uses thermodynamic principles to understand resource flows and system constraints
Scope of Application:
Quantum Economics: Particularly strong in financial modeling and behavioral economics
Entropy Economics: More concerned with macroeconomic resource allocation and sustainability constraints
View of Economic Systems:
Quantum Economics: Systems characterized by fundamental uncertainty and observer effects
Entropy Economics: Systems bound by physical laws of energy conservation and entropy increase
Both approaches represent departures from traditional neoclassical economics, but they offer different lenses for understanding economic complexity. Quantum economics emphasizes the probabilistic and behavioral dimensions, while entropy economics stresses physical constraints and energy flows in economic systems.
Seem really as if they are complementary.
It looks that way
Quantum processes are found in photosynthesis, neural activity and vision. Also in GPS systems, LEDs, mobile phones, computing.
I have been reading and writing ( for myself and friends) about its role in things once called ‘supernatural’ such as telepathy, clairvoyance, meditation and even survival of death.
Do I have a clear idea of the big picture or full understanding? NO!
But I do know the old concepts are not sufficient to understand the world and we must tread new paths without knowing where we will end up.
That’s about how far we have got.
Can I recommend How to Teach Quantum Physics to Your Dog by Chad Orzel. Entertaining and does a good job of the basics. Still makes your brain hurt!
I’d suggest that complexity economics is more directly relevant, with the work of people like Doyne Farmer and Eric Beinhocker at the Martin School, and at Santa Fe Institute. They are much further down the track and with agent based models are able to demonstrate that they are able to model economies far better than the mainstream. Steve Keen is of course in that space as well. Doyne Farmers recent book is a good intro or dig around the Santa Fe institute web site.
However the cult of mainstream economics is still deeply resistant and predominates. All those politicians who did PPE and know just enough of the wrong ideas to think they understand but be deeply wrong.
There is a copy of that in the house.