{"id":85675,"date":"2025-09-11T07:19:42","date_gmt":"2025-09-11T06:19:42","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=85675"},"modified":"2025-09-11T07:19:42","modified_gmt":"2025-09-11T06:19:42","slug":"quantum-economics-part-5-speculation-potential-and-energy","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/11\/quantum-economics-part-5-speculation-potential-and-energy\/","title":{"rendered":"Quantum economics, part 5: Speculation, Potential, and Energy"},"content":{"rendered":"<p><span style=\"color: #000000;\"><em>This post continues the story of quantum economics, <a style=\"color: #000000;\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/07\/discussing-quantum-economics-accounting-money-and-more\/\" target=\"_blank\" rel=\"noopener\">which began here<\/a>. There is a summary of posts to date at the end of this post.<\/em><\/span><\/p>\n<p><span style=\"color: #000000;\"><em>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.<\/em><\/span><\/p>\n<hr \/>\n<p style=\"padding-left: 40px;\"><em>\u201cSpeculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.\u201d<\/em>\u2013 <a href=\"https:\/\/www.goodreads.com\/work\/quotes\/280304\" target=\"_blank\" rel=\"noopener\">Fred Schwed<\/a><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">To continue our exploration of a quantum economics metaphor, consider the possibility that every balance in a bank account represents potential. It is, in other words, stored energy, waiting to be released. That release might come through consumption, by buying goods and services. It might come through investment, by creating productive capacity. Or it might be channelled into speculation by gambling on the future prices of assets.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Each route uses the same potential, but with very different effects. <\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Consumption sends ripples through the economy. <\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Investment creates lasting change. <\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Speculation, however, often traps energy in sterile loops that can quite easily be destructive. <\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">The same monetary potential, deployed differently, leads to profoundly different outcomes.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">To see this, quantum thinking helps.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>First: money as stored energy<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">In physics, energy can be stored as potential. A boulder at the top of a hill has gravitational potential. Release it, and the potential becomes kinetic.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Money functions in a similar way. A bank balance is potential energy in the monetary field. It can be released to set processes in motion. Until it is spent or invested, it is latent.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">This potential is not fixed. Its impact depends on how it is released.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Second: consumption as wave propagation<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">When money is spent on consumption, the potential energy within the money is released and turns into waves of demand.<\/span><\/p>\n<ul>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">You spend \u00a3100 at a shop.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">The shop pays its staff, and then their suppliers.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">The suppliers pay their workers, and their suppliers.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">All the workers noted previously spend their wages.<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span style=\"color: #000000;\">In other words, the ripple created by a single decision to spend spreads far and wide. The multiplier effect means the \u00a3100 can generate several times its value in economic output. Seen in this way, consumption is wave propagation: the energy released from money gainfully spent into the economy is amplified as it circulates.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">This, of course, is why fiscal stimulus works. Government spending creates demand that ripples outward. And it is why austerity fails: cut spending, and the waves collapse.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Third: investment as a quantum jump<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">Investment behaves differently. It does not just propagate waves. It alters the system.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">When money is used to build a factory, train a worker, or create a new technology, the productive capacity of the economy changes. This is a <span class=\"s2\">quantum jump<\/span>: the system moves to a new energy state.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">The effects are lasting. A trained worker continues to produce. A new factory continues to generate output. Investment transforms potential into structural change.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">This is why public investment is so powerful. It does not just stimulate demand. It creates new states of capacity, shifting the economy permanently.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Fourth: speculation as a standing wave<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">However, money used for speculation is quite different. It traps energy within financial markets. Examples of this activity might\u00a0 include this simple series of transactions:<\/span><\/p>\n<ul>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Money is used to buy shares, hoping their price will rise.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Another trader buys at the higher price, hoping to sell later.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">The cycle repeats.<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span style=\"color: #000000;\">In this case, the money circulates, but entirely within what is, in effect, a closed loop. Prices oscillate, but little new output is created. In fact, resources may be drained from the productive economy. This is a <span class=\"s2\">standing wave<\/span>: energy bouncing back and forth, creating volatility but not propagation.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">In physics, standing waves can build to resonance, amplifying dangerously until systems collapse. In finance, bubbles do the same. Prices spiral upward, detached from reality, until collapse is inevitable.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Fifth: the costs of speculation<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">Speculation has real costs.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">First, there is crowding out.<\/span> Money tied up in speculation is money not spent on consumption or investment. Potential energy is trapped in sterile circuits.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">Second, there is instability.<\/span> Bubbles burst, causing crashes. The energy released destroys confidence and output.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">Third, there is inequality.<\/span> Gains from speculation accrue to the wealthy, who own financial assets. Losses, when crashes occur, are socialised.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">Fourth, distorted signals are being sent.<\/span> Asset prices rise not because of productive value but because of speculative demand, misleading policymakers and investors.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Speculation is not harmless gambling. It destabilises the economy.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Sixth: the entanglement of speculation and reality<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">Speculation may seem detached from the real economy, but it is always entangled with it.<\/span><\/p>\n<ul>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Housing bubbles raise rents, pricing people out of homes.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">A stock bubble drives executive pay, skewing corporate priorities.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">A commodity bubble raises food prices, hurting many, and most especially the poorest in any society.<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span style=\"color: #000000;\">Financial speculation feeds back into real lives. The entanglement cannot be ignored.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Seventh: policy implications<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">If money is potential energy, we must ask how best to release it.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">First, we must encourage sustainable consumption.<\/span> This supports wages, incomes, and, in turn, public services by creating greater potential for tax revenues that control the impact of additional state spending. This keeps waves propagating.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">Second, prioritise investment.<\/span> This requires the funding of infrastructure, training, and the green transition. These create quantum jumps in capacity.<\/span><\/p>\n<p class=\"p1\"><span style=\"color: #000000;\"><span class=\"s1\">Third, control speculation.<\/span> This requires capital controls, financial transaction taxes (an issue I will address in a video, soon) and tighter regulations. Dampen standing waves before they destabilise.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">The choice is not neutral. Left to itself, money flows towards speculation, because returns appear quicker. Policy must redirect potential energy into channels that sustain society.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Eighth: the myth of neutrality<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">Mainstream economics often treats the use of money as neutral: whether spent on consumption, investment, or speculation, it is all the same \u201cdemand.\u201d<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">This is wrong. The macroeconomic effects differ radically. Consumption supports demand today. Investment builds capacity for tomorrow. Speculation destabilises both.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">To treat them as equivalent is inappropriate. One produces nothing useful, and might actually drain productive resources from the economy. The other drives the system forward.<\/span><\/p>\n<hr \/>\n<h2><span style=\"color: #000000;\"><b>Ninth: the politics of potential<\/b><\/span><\/h2>\n<p class=\"p4\"><span style=\"color: #000000;\">Recognising money as potential energy shifts politics.<\/span><\/p>\n<ul>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">It exposes austerity as waste: leaving potential idle rather than releasing it.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">It exposes inequality as damaging: concentrating potential in hands likely to hoard or speculate.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">It exposes financial liberalisation as reckless: allowing standing waves of speculation to destabilise society.<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span style=\"color: #000000;\">The politics of potential is about directing energy wisely: towards flows that sustain, towards investments that transform, away from loops that destabilise.<\/span><\/p>\n<hr \/>\n<h3><span style=\"color: #000000;\"><b>Conclusion<\/b><\/span><\/h3>\n<p class=\"p4\"><span style=\"color: #000000;\">Money is not wealth. It is potential. What matters is how that potential is released.<\/span><\/p>\n<ul>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Consumption propagates waves.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Investment creates quantum jumps.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Speculation traps energy in dangerous loops.<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span style=\"color: #000000;\">Policy that ignores these differences will fail.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">Policy that recognises them can succeed.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">If we treat money as potential energy, and direct it towards constructive channels, we can sustain flows, build capacity, and avoid destructive resonance.<\/span><\/p>\n<p class=\"p4\"><span style=\"color: #000000;\">And only then can we fund the future.<\/span><\/p>\n<hr \/>\n<h3><strong>Previous posts in this series<\/strong><\/h3>\n<ol>\n<li><a role=\"link\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/07\/discussing-quantum-economics-accounting-money-and-more\/\">Discussing quantum economics, accounting, money and more<\/a><\/li>\n<li><a role=\"link\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/07\/quantum-economics-part-1-why-quantum-thinking-matters-for-economics\/\">Quantum economics, part 1: Why Quantum Thinking Matters for Economics<\/a><\/li>\n<li><a role=\"link\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/08\/quantum-economics-part-2-money-as-particle-and-flow\/\">Quantum economics, part 2: Money as Particle and Flow<\/a><\/li>\n<li><a role=\"link\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/09\/quantum-economics-part-3-entanglement-and-double-entry-bookkeeping\/\">Quantum economics, part 3: Entanglement and Double-Entry Bookkeeping<\/a><\/li>\n<li><a role=\"link\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/10\/quantum-economics-part-4-quantum-uncertainty-and-economic-forecasts\/\">Quantum economics, part 4: Quantum Uncertainty and Economic Forecasts<\/a><\/li>\n<\/ol>\n<hr \/>\n<h3><b>Comments\u00a0<\/b><\/h3>\n<p>When commenting, please take note of this blog\u2019s comment policy,\u00a0<a href=\"https:\/\/www.taxresearch.org.uk\/Blog\/about\/comments\/\">which is available here<\/a>. Contravening this policy will result in comments being deleted before or after initial publication at the editor\u2019s sole discretion and without explanation being required or offered.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>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.<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/11\/quantum-economics-part-5-speculation-potential-and-energy\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[67,26,35,106,225],"tags":[],"class_list":["post-85675","post","type-post","status-publish","format-standard","hentry","category-accountancy","category-accounting","category-economics","category-politics","category-quantum-economics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/85675","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=85675"}],"version-history":[{"count":5,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/85675\/revisions"}],"predecessor-version":[{"id":85807,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/85675\/revisions\/85807"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=85675"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=85675"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=85675"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}