{"id":85677,"date":"2025-09-12T07:11:01","date_gmt":"2025-09-12T06:11:01","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=85677"},"modified":"2025-09-12T07:11:01","modified_gmt":"2025-09-12T06:11:01","slug":"quantum-economics-part-6-infinite-promises-finite-energy-mmt-and-constraint","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/09\/12\/quantum-economics-part-6-infinite-promises-finite-energy-mmt-and-constraint\/","title":{"rendered":"Quantum economics, part 6: Infinite Promises, Finite Energy (MMT and constraint)"},"content":{"rendered":"

This post continues the story of quantum economics, which began here<\/a>. There is a summary of posts to date at the end of this post.<\/em><\/span><\/p>\n

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

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Infinite Promises, Finite Energy (MMT and Constraint)<\/b><\/span><\/h2>\n

\u201cThe state can create money. It cannot create wheat.\u201d \u2013 anonymous<\/span><\/p><\/blockquote>\n

Modern Monetary Theory (MMT) has clarified something economists long obscured: a currency-issuing government cannot run out of money. It can always pay in its own currency. It does not need to tax first, or borrow first. It spends by creating money, and taxes later to control inflation and reclaim capacity.<\/span><\/p>\n

This insight overturns the myths of austerity. But it also raises a question: if the government can create unlimited money, does that mean we face no constraints? Can we fund anything we want? The answer is both yes and no. Yes, money is unlimited. No, real resources are not.<\/span><\/p>\n

Quantum thinking helps explain this tension. Money is like energy: it can be issued in infinite units, but the energy per unit depends on the resources available. If promises outstrip reality, the value of each promise falls. The challenge is not to limit promises, but to anchor them in the finite energy of the real world.<\/span><\/p>\n

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First: MMT\u2019s central claim<\/b><\/span><\/h2>\n

At its core, MMT makes three points:<\/span><\/p>\n

    \n
  1. \n

    Government spending precedes taxation.<\/b><\/span> The state creates money when it spends. Taxation withdraws money later.<\/span><\/p>\n<\/li>\n

  2. \n

    Borrowing is optional.<\/b><\/span> Government bonds are not financing tools but interest-bearing savings accounts for the private sector.<\/span><\/p>\n<\/li>\n

  3. \n

    The real limit is inflation.<\/b><\/span> The state can create unlimited money, but if it spends beyond real capacity, prices rise.<\/span><\/p>\n<\/li>\n<\/ol>\n

    This is not a theory but a description. It is how modern money works.<\/span><\/p>\n

    \n

    Second: the illusion of financial constraint<\/b><\/span><\/h2>\n

    Politicians and pundits like to say \u201cthere is no money\u201d when justifying cuts. This is false. A sovereign government cannot run out of its own currency. The Bank of England cannot bounce the government\u2019s cheque.<\/span><\/p>\n

    The illusion of financial constraint is a political tool. It keeps the public compliant. It justifies austerity. It disguises choices as necessities.<\/span><\/p>\n

    But once we accept that money is unlimited, the conversation shifts. The real question becomes: what are the constraints that matter?<\/span><\/p>\n

    \n

    Third: the finite energy of resources<\/b><\/span><\/h2>\n

    In physics, energy is conserved. You can convert it from one form to another, but you cannot create more.<\/span><\/p>\n

    In economics, real resources \u2014 land, labour, energy, materials \u2014 are finite. You can mobilise them, distribute them, and use them more efficiently. But you cannot conjure them from nothing.<\/span><\/p>\n

    Money can be created without limit. Resources cannot. The energy of the economy is fixed by physical and social capacity.<\/span><\/p>\n

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    Fourth: promises versus capacity<\/b><\/span><\/h2>\n

    Issuing money is a promise: a promise that goods and services will be delivered in exchange. But if the promises exceed what can be delivered, the value of each promise falls.<\/span><\/p>\n

    This is inflation. Too much money chasing too few goods. The problem is not that money has been created. It is that resources have not expanded to match.<\/span><\/p>\n

    The lesson is simple: money creation must be matched to real capacity. Create promises in line with energy, and the system is stable. Create promises beyond energy, and the system overheats.<\/span><\/p>\n

    \n

    Fifth: productive use of promises<\/b><\/span><\/h2>\n

    All this being said, not all spending is equal. How money is used determines whether capacity expands or contracts.<\/span><\/p>\n