This post continues the story of quantum economics, which began here. There is a summary of posts to date at the end of this post.
Can you please note when reading this post and others in the series that I am not suggesting that quantum physics and economics are akin to each other. Instead, I am exploring how quantum thinking might help build new economic narratives, which is quite a different goal.
Entanglement and Double-Entry Bookkeeping
“When we measure one particle, the other instantly takes on a correlated state, no matter how far apart they are.” – Albert Einstein (on entanglement, which he called “spooky action at a distance”)
Quantum entanglement is one of the strangest and most important discoveries of modern physics. Two particles, once linked, cannot be described independently of each other. Measure the spin of one, and you know the spin of the other, even if they are separated by light-years. Their states are not separate but relational.
This is not a world of isolated objects but of deep connections. And if that sounds alien, it should not. Accountants have known about entanglement for centuries. They call it double-entry bookkeeping.
First: the principle of entanglement in accounting
Every transaction has two sides. Every debit has a credit. Every asset has a liability.
This is not an optional convention. It is a structural truth. The debit cannot exist without the credit. They are entangled.
Take the simplest case:
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You pay £100 into your bank.
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On your balance sheet: Debit: Cash at bank £100.
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On the bank's balance sheet: Credit: Customer deposits £100.
Your asset is the bank's liability. The two entries are linked. To describe one without the other is meaningless.
This is accounting's entanglement.
Second: the suspense account as superposition
Sometimes we know one side of the transaction but not the other. We enter the debit, but we are not sure of the credit. Accountants call the placeholder a suspense account.
In quantum terms, this is superposition. The credit exists, but in a cloud of possibilities. It might be capital introduced. It might be a loan. It might be revenue. Until we identify it, the entry is in multiple potential states.
The moment we observe — by tracing the source — the wavefunction collapses. The credit is pinned down. The system resolves.
But at no point is the entanglement broken. We always knew that some credit must exist. The uncertainty was about which one, not about whether.
Third: why this matters
The entanglement metaphor is not just clever wordplay. It reveals something profound about money:
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Money is never a thing in isolation. It always exists as part of a relationship.
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Every asset has a counterparty. My deposit is your debt. Your bond is my investment.
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There is no such thing as money without context. To imagine money as a commodity in itself is to forget its entanglement.
This is why the household analogy for government finances is false. When governments spend, they create deposits in the banking system. These are entangled liabilities of the state. The so-called “national debt” is nothing more than the other side of the public's financial assets.
Economics that treats debt as a burden misses this entanglement. The liability of the state is the asset of its citizens. You cannot have one without the other.
Fourth: entanglement and trust
Entanglement in physics is a matter of natural law. In accounting it is a matter of trust.
We trust that when we hold money, someone else is obliged to honour it. My £10 note is the Bank of England's liability. My bank deposit is my bank's liability. These obligations are guaranteed by the structure of double-entry.
When trust breaks down — when liabilities are not honoured — the entanglement is revealed in crisis. A bank run is the sudden realisation that the entangled liabilities may not be redeemable. A sovereign default is the breaking of entanglement at state level.
The very stability of the financial system rests on respecting entanglement.
Fifth: auditing as measurement
In physics, measurement collapses superpositions. In accounting, audit plays the same role.
The auditor examines the entangled pairs. If the debit says £100, does the credit say £100? If the asset says £1 million, is the liability recorded somewhere else? The act of auditing tests the entanglement.
When the entanglement is broken — when debits and credits do not balance — we know something is wrong. Fraud, error, or misstatement has occurred.
Auditing is the accounting equivalent of quantum measurement. It makes the hidden correlations explicit.
Sixth: macroeconomic entanglement
The entanglement metaphor extends beyond firms and banks. It applies to the whole economy.
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The government's deficit is the private sector's surplus.
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The UK's trade deficit is the rest of the world's trade surplus.
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One person's saving is another person's debt.
These are not optional relationships. They are accounting identities. They are entanglements on a macro scale.
When politicians talk of “reducing the deficit,” they forget that this means “reducing the private sector's surplus.” When they boast of trade surpluses, they forget that this means others must run deficits.
Macroeconomic policy that ignores entanglement is incoherent.
Seventh: speculation and broken entanglement
Speculative markets sometimes appear to escape entanglement. Prices spiral upwards without a visible link to underlying obligations. Derivatives pile upon derivatives.
But the entanglement remains. Every derivative contract has a counterparty. Every leveraged bet is entangled with another balance sheet.
When speculation collapses, it is the entanglement that brings contagion. Losses cascade because balance sheets are linked. The illusion of independence vanishes. The 2008 crisis was entanglement revealed in destructive form.
Eighth: policy implications
Recognising entanglement leads to different policies.
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Government finance. Stop pretending the state is a household. Its liabilities are the public's assets. Its spending creates deposits. Entanglement makes deficits normal.
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Banking. Regulation must recognise systemic entanglement. Banks are not independent firms but nodes in a web. Capital requirements and resolution plans must respect this.
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Tax justice. When wealthy individuals hide assets in secrecy jurisdictions, they break entanglement. The counterparty entries are concealed. Transparency is restoring visibility to the entangled whole.
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Inequality. Entanglement shows that wealth at the top is mirrored by obligations elsewhere. If assets grow too fast, liabilities crush others. Redistribution is not envy but rebalancing entanglement.
Ninth: the deeper lesson
Entanglement in physics shows that reality is relational, not absolute. Particles do not exist as self-contained units but as parts of larger states.
Money is the same. It is not a thing but a relation. An entry is meaningless without its counter-entry. An asset is meaningless without its liability.
This undermines the myth of money as a commodity. Gold standard thinking imagined money as a thing in itself. Neoclassical economics still toys with this illusion. But the truth is relational: money is a web of entanglement, guaranteed by double-entry bookkeeping.
Conclusion
Double-entry bookkeeping is more than a method. It is a philosophy of entanglement. It insists that nothing stands alone, that every entry is linked, that balance is structural.
Quantum entanglement and accounting entanglement are not the same, but the metaphor illuminates. Both reveal a world that is not atomistic but relational. Both show that attempts to think in isolation are misguided.
An economics that ignores entanglement is doomed to error. An economics that embraces it can see the truth: that money, debt, and assets are not separate things but entangled relationships.
And only by respecting those entanglements can we fund the future.
Previous posts in this series
- Discussing quantum economics, accounting, money and more
- Quantum economics, part 1: Why Quantum Thinking Matters for Economics
- Quantum economics, part 2: Money as Particle and Flow
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Ask the question does building an economic narrative based on quantum physics simplify or complicate the issue. I would strongly argue the latter in which case you will only carry a few “die hards” along with you. It will be impossible to broaden the appeal to a wider audience and therefore you risk your economic message becoming marginalised not expanded. This of course is just my opinion.
How do you get to simple solutions? First of all you undertsand the complexity. That is my point here. You are missing it.
I disagree. I was sceptical at first but am beginning to enjoy the quantum analogy and find it does clarify.
If I’d read this stuff when I was younger I might have aspired to be an accountant rather than a train driver.
🙂
I like this very much.
Neo-liberalism has successfully attempted to isolate inputs and outputs into economics and portray them as ‘stand alone’ and unrelated, saying that such relationships are just personal opinions or ‘normative’ even – judgements based on values that have nothing to do with ‘efficiency’ and /or rationality.
The use of quantum concepts has the potential then to be more inclusive and re-bind cause and effect because it seems to me to acknowledge these relationships instead of saying that they are not related/causal or simply do not matter.
This has huge implications – even legal ones – for how we currently work in capitalism. It may answer the question then – finally , about the debit side of the economy, the resources taken out of the earth or simply exploited and the debit side of society as money is moved around unfairly as Neo-lib thinking is all about the credit side to me and nothing else. Could this tie in with resource accounting? Acknowledging the debit (money out) side could lead to a different, more ethical type of doing business.
All good questions – let’s see how this develops – I am not sure as yet!
In theory it ought to be obvious to human beings that the very basis of life is relational in the sense that living creatures have consciousness which allows them to choose, a clear necessity for survival. In other words life is cybernetic it steers itself to the best of its abilities. The use of money of course extends our abilities but few now understand in our current society the need to balance its use between individual and communal use. The former is dominant hence the misconceptions deliberately pushed by the wealthy in regard to money mechanics.
Here are two papers that help explain the relational nature of life from human beings to microbes:-
http://ndl.ethernet.edu.et/bitstream/123456789/42836/1/380.pdf#page=546
See Chapter 19, page 541 “On the Evolution of Human Motivation: The Role of
Social Prosthetic Systems” Stephen M. Kosslyn
https://ankara.lti.cs.cmu.edu/11780/sites/default/files/BacterialLinguisticsandSocialIntelligence.pdf
Wow, this would have made my bookkeeping course much more fun! Keep tending the fruitful vine.
This is a premature reaction, but double entry/entanglement is relevant here. I used to work for an inventive R&D company, trying to introduce new mechanical/electronic controls. (Electro-rheological fluid, if anyone wants to know) We spent a high proportion of income on patents for some of the new ideas. High renewal fees every year for the patents. Our auditors were puzzled about how these patents could be an asset, making us solvent. Only licensing the patents would show a monetary reality. What would our expenditure be entangled with? And this extends to all kinds of intellectual and social capital — these do exist, even if at a more abstract level than money. But I’m reading these posts with great interest; so very stimulating.
An auditor would’ve been looking for what they call a “cash generating unit”. Without one of those they cannot value an intangible asset but, in general, auditors struggle considerably with anything that is intangible, and I am not surprised at their questions as a result. The abstract is a little too nuanced for them to understand.
And thanks for your comment.
This morning I have been reading through each of your articles on Quantum Economics. I’ve found them to be a deeply resonant way of highlighting and explaining the current flaws in our economic system that you, and many others have done a great job of identifying.
I’m currently an undergraduate student in my final year of study for economics. I have, admittedly loose, plans to continue my education further. I had initially quite struggled with the cognitive dissonance that arose from being taught predominantly neo-keynesian economics in an economy that had not only ignored core concepts of the school of thought, yet simultaneously disproved basic fundamental assumptions it held.
Your work helping bring MMT to the public has been incredibly exciting, and regardless of the outcome, I will treasure certain analogies you have created using Quantum Economics. I doubt to anyone’s surprise, economics is still being taught as rigorously mathematical. As someone with a proclivity for objectivity and numbers, it took quite a bit of reminding myself that we are studying human beings.
Science continues to exist without humans, Mathematics is just the language humans best used to understand it’s beauty. It has little place when used in economics to atomise and rationalise the human experience.
My favourite quote of yours in this article: “Quantum entanglement and accounting entanglement are not the same, but the metaphor illuminates. Both reveal a world that is not atomistic but relational.”
It’s no wonder that neoliberalism, in it’s attempt to solidify the “science” of an atomised economics, helped contributed to an increasingly individualised society. In a world of intense interconnection, collective understanding has become ironically impossible.
If we can adopt a mindset of economic culpability and impact, it becomes much harder for large decisions to have no addressed victim. We are all entangled at the sub-atomic level. You and your Wife are doing a fantastic job showing how we are on an economic level, too.
Apologies for the long-winded comment, but MMT alongside Quantum Economics, as it becomes more fleshed out, will have a long standing impact upon my entire economic career, however it shapes up to be. I truly hope I can do you, and many other inspiring educators the justice of spreading and developing the work you have all put so many years into.
All the best to you and your family.
Many thanks for your comment, which I much appreciate. Good luck with your studies. And never forget, economics is about people, whatever economist say. Their maths is an impediment to almost any form of progress on their part.
You were taught neo-keynesian economics?
Compared to some places that is quite progressive.
Luckily so, I suppose. We had some modules that taught commonly accepted neoliberal principles, yet our core modules have largely been ran by a Keynesian. It’s quite a progressive school. Unfortunately, my education for macroeconomics has been incredibly poor here, I couldn’t at all take it seriously. I’m quite excited to go back and educate myself using their resources with more experience and perspective.
Macro is almost invariably badly taught, starting from the assumption that it is micro scaled up. It isn’t. It is the other side of the entry in some ways, and whilst entangled, the power to create money changes everything.
It might appear that a physics qualification should give me some advantage, but when I started to become interested in economics, nothing I read made any sense as I saw no logic underlying the ideas I was being told to have faith and accept. Then, by accident I fell over MMT.
But even so, the media continued to preach things that now made even less sense. Over time, I have learnt just how wrong the neoliberal’s misguided preaching is. I have longed for something that had the beauty of physics to explain fully our economic life. Earlier this year, entropy economics appeared, and now this series by Richard – Quantum Economics – is linking the physics I learnt, which should underpin everything, to our economic life.
It demonstrates that, if we will only look, we can see that our economic life, as described by the media, is actually a highly diseased aspect of modern life. Like all afflicted with disease, nature decrees an early death if untreated. The parts Richard has so far posted hold out the promise of the knowledge of how a successful treatment might be administered. I feel as if we have transitioned into a new and hopeful state, one in which the underlying laws of nature can properly be applied to our economic life. But the trick will be to put the current media and may other witch doctors into the junk bin so that a new paradigm can take hold.
I note your conclusion, and agree with it, but without a narrative, we cannot get that there, and that is what I am trying to create. I am editing part four now, and I’m realising just how hard it is to make this stuff comprehensible.
Hi Richard,
Thought provoking stuff, as ever. The Quantum Economics series has, for me, been an exercise in quietening my own prejudices, and exercising patience and thought. Like ‘Alexander’ (commented 2025-09-08), my first degree is in Physics, and I immediately cringe when Quantum Physics is used in more of a pop-science way. But, having sat back, and thought about your quantum economics series, it’s not a bad metaphor. The entanglement is a bit of a sticky one, but I get the point, which I think is the idea of this series?
To lend an overlay, my current occupation centres largely around semiconductors. Why is this relevant? The answer is that the behaviour of charge carriers in semiconductors is determined by quantum physics, and of course, the type of answer you get from whatever question you are asking is determined by the question. Very close, I think, to the macro/micro thoughts in evidence in this series.
Another parallel that I would like to draw to attention, is that the flow of electricity is typically explained and calculated by macro-level equations, which consider the populations of particles under the conditions in question. However, it is explicit within those equations that the macro effect is determined by the density of particles within the system, which in turn is determined by the blended quantised states that these particles may only occupy.
Different mechanisms are used to describe how these populations of particles then move and behave through semiconductors. Diffusion occurs at p-n junctions, which lead to depletion regions (areas with negligible density of charge carriers). Drift is caused by externally applied potentials. There are a lot of parallels with thermodynamics, and I’m sure, other branches of classical physics
When I stumbled across TRUK, at the time of the 2015 election, you writing gave me many “ah-ha” moments, quickly allowing me to build a mental model for myself that treated money on a national scale with the dual properties of a tally system (micro-ish) and flow (macro-ish). The tally-flow duality of money. This series feels like a closing of the loop for me.
One final parting shot: it amuses me that you keep quoting Einstein, as he was one of the most vocal adversaries of QM during its development… “god does not play dice with the universe”
As ever, thank you for your unrelenting work – KUTGW!
Thanks
Much appreciated
And I am aware that I will not get all of this right – and nor will I understand it all (and I can live with that, because I am not seeking to write quantumm mechanics – I am trying to create new economic metaphors) – but as you say “I get the point, which I think is the idea of this series?”
It is, thank you.
But I have little doubt I will have to revisit much of this in due course – but my way of thinking is to talk out loud – and that is what I am doing.
‘Quantum entanglement and accounting entanglement are not the same, but the metaphor illuminates.’
It certainly does!
Inspired!
Excellent and thank you.
PSR is also building, I suggest, on a very firm analogy.
Thanks
Entanglement is Apt, I think.
I studied different economic perspectives through graduate school- Marxist, Hayek, Keynesian, Chicago School, and Herman Daly’s sustainable economics. I did this in self-defense, as my father was the right-wing economist who wrote the Kennedy tax cut and, 20 years later, the Reagan tax cuts. The premises of supply-side economics are that there is no relationship of mutuality owed by any individual to society, including to his or her own children; that one will harvest the seed corn until the last marginal dollar of profit is wrung from it.
From my vantage point, “entanglement” can take economics into the biological and physical world, from which it has always been absent. Because a European in Oxbridge could imagine the world as infinite resources, economics could develop with the belligerent triviality of pre-World War I monarchs.
Once we entangle economics in bio-reality, we get pretty quickly from neo-liberalism to A – the Insurance Industry Rules The World and B – we need to articulate another formula or equation for economists, so that we can further develop sustainable economics.
I look forward to reading the next posts about entanglement and economics.
Thanks
There is another in the series coming out this morning.