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'''Quantum economics''' is an emerging research field which applies mathematical methods and ideas from quantum physics to the field of [[Finance:Economics|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 [[Finance:Quantum finance|quantum finance]] and [[Quantum cognition|quantum cognition]], and is a sub-field of [[Physics:Quantum social science|quantum social science]].
== History ==
A number of economists including [[Biography:Paul Samuelson|Paul Samuelson]]<ref>{{cite encyclopedia|title= A quantum theory model of economics: Is the co-ordinating entrepreneur just worth his profit? |first= Paul|last= Samuelson |date = 1979 |encyclopedia= The collected scientific papers of Paul A. Samuelson |volume= 4 |location= Cambridge, Mass. |publisher= MIT Press |pages= 104–110}}</ref> and Bernard Schmitt (whose "quantum macroeconomics" treated production as an instantaneous emission<ref>{{cite web | url= https://www.quantum-macroeconomics.info/index.php/language/en/manifesto/ |date= December 2011 |title=Manifesto | access-date=29 March 2019}}</ref>) have found inspiration in quantum theory. Perhaps the first to directly exploit quantum techniques in economic analysis, however, was the Pakistani mathematician [[Biography:Asghar Qadir|Asghar Qadir]]. In his 1978 paper ''Quantum Economics'', he argued that the formalism of [[Physics:Quantum mechanics|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."<ref name="qadirpaper">{{cite journal | last=Qadir | first= Asghar |date=1978 |title= Quantum Economics |journal= Pakistan Economic and Social Review |volume=16 | issue=3/4 |pages=117–126}}</ref> 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.<ref name="aertspaper">{{cite journal | last1=Aerts | first1= D. | last2=Aerts | first2= S. | date=1994 |title= Applications of quantum statistics in psychological studies of decision processes |journal= Foundations of Science |volume=1 |pages=85–97| doi= 10.1007/BF00208726 }}</ref> At the same time, researchers such as economist [[Biography:Martin Shubik|Martin Shubik]], physicist Martin Schaden and social scientist Emmanuel Haven were beginning to use the quantum formalism to model the uncertainty of stock markets.<ref name="shubikpaper">{{cite journal | last=Shubik | first= M. | date=1999 |title= Quantum economics, uncertainty and the optimal grid size |journal= Economics Letters |volume=64 | issue=3 | pages=277–278| doi= 10.1016/S0165-1765(99)00095-6 }}</ref><ref>{{cite journal |author=Schaden, Martin | title=Quantum Finance | publisher=Physica A|year= 2002 | volume=316 | issue=1–4 |journal=Physica A: Statistical Mechanics and Its Applications |pages=511–538| doi=10.1016/S0378-4371(02)01200-1 | arxiv=physics/0203006 | bibcode=2002PhyA..316..511S | s2cid=204898656 }}</ref><ref>{{cite journal |author=Haven, Emmanuel |title=A discussion on embedding the Black–Scholes option pricing model in a quantum physics setting |publisher=Physica A|year= 2002 |volume=304 |issue=3–4 |journal=Physica A: Statistical Mechanics and Its Applications |pages=507–524|doi=10.1016/S0378-4371(01)00568-4 |bibcode=2002PhyA..304..507H }}</ref>

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 [[Finance:Option|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.’’<ref name="baaquiebook">{{cite book |last= Baaquie |first= Belal E. |date= 2007 | title= Quantum Finance: Path Integrals and Hamiltonians for Options and Interest Rates |publisher= Cambridge University Press | isbn= 978-0521714785}}</ref><ref name="ariolipaper">{{cite journal | last1= Arioli | first1= Gianni | last2= Giovanni | first2= Valente | date=2021 |title= What Is Really Quantum in Quantum Econophysics? |journal= Philosophy of Science |volume=88 | issue=4 | pages=665–685| doi= 10.1086/713921 | s2cid= 233975845 }}</ref> In a 2010 review, Schaden noted that quantum techniques could only be justified if the financial system could be shown to exhibit quantum properties such as entanglement, and if their use led to genuine simplifications over existing stochastic approaches.<ref name="schadenreview">{{cite journal | last= Schaden | first= Martin | date=2010 |title= Interest Rates and Coupon Bonds in Quantum Finance |journal= American Journal of Physics |volume=78 | issue=6 | pages=654–656| doi= 10.1119/1.3310011 }}</ref> In their 2013 book ''Quantum Social Science'', Emmanuel Haven and Andrei Khrennikov extended Baaquie’s work in finance to questions such as [[Arbitrage|arbitrage]] and the [[Social:Reflexivity (social theory)|reflexivity]] theory of George Soros.<ref name="havenbook">{{cite book |last1= Haven |first1= Emmanuel E. | last2= Khrennikov | first2= Andrei | date= 2013 | title= Quantum Social Science |publisher= Cambridge University Press | isbn= 978-1107012820}}</ref>

In a 2016 paper<ref name="orrellpaper">{{cite journal | last= Orrell | first= David | date=2016 |title= A Quantum Theory of Money and Value |journal= Economic Thought |volume=5 | issue=2 | pages=19–28}}</ref> and book<ref name=orrellbook>{{cite book |last1= Orrell |first1= David | last2= Chlupatý |first2= Roman | date= 2016|title= The Evolution of Money |publisher= Columbia University Press | pages = 171–175 | isbn= 978-0231173728}}</ref><ref name="teesearticle">{{cite news | last= Teese |first= Colin |date=11 February 2017 |title=Money and quantum physics |magazine=News Weekly}}</ref> (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, and the use of money leads to mental and financial entanglement which can be modeled using quantum methods. In his 2018 book ''Quantum Economics: The New Science of Money''<ref name=orrellbook2>{{cite book |last= Orrell |first= David | date= 2018|title= Quantum Economics: The New Science of Money |publisher= Icon Books | isbn= 978-1785783999}}</ref><ref name="cleggreview">{{cite web | url= http://popsciencebooks.blogspot.com/2018/07/quantum-economics-david-orrell.html | last= Clegg |first= Brian |date= 5 July 2018 |title=Quantum Economics - David Orrell | access-date=17 September 2018}}</ref> and other works <ref name=orrellbook3>{{cite book |last1= Orrell |first1= David | date= 2020|title= Quantum Economics and Finance: An Applied Mathematics Introduction |publisher= Panda Ohana | isbn= 978-1916081611}}</ref><ref name="orrellpaper2">{{cite journal | last= Orrell | first= David | date=2020 |title= A quantum model of supply and demand |journal= Physica A: Statistical Mechanics and Its Applications |volume=539 | pages=122928| doi= 10.1016/j.physa.2019.122928 | bibcode= 2020PhyA..53922928O }}</ref> he 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 [[Organization:Bretton Woods Committee|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."<ref name="sheng">{{cite book |last=Sheng |first=Andrew |title= Revitalizing the Spirit of Bretton Woods: 50 Perspectives on the Future of the Global Economic System |publisher= Bretton Woods Committee |date=July 2019 |pages=360–367 |chapter= A New Bretton Woods Vision for a Global Green New Deal | chapter-url= https://view.flipdocs.com/?ID=10025597_345534#382}}</ref>

== Description ==
Just as quantum physics differs in fundamental ways from [[Physics:Classical physics|classical physics]], quantum economics differs from [[Finance:Neoclassical economics|neoclassical economics]] in a number of key respects.

Neoclassical economics is based on expected utility theory, which combines utility theory to model people's [[Finance:Preference (economics)|preferences]], and [[Probability theory|probability theory]] to model expectations under uncertainty. However the field of [[Quantum cognition|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 [[Finance:Behavioral economics|behavioral economics]] are inconsistent with [[Philosophy:Classical logic|classical logic]], but agree with quantum decision theory of the sort assumed in quantum social science.<ref name="wendtbook">{{cite book |last= Wendt |first= Alexander |date= 2015 |title= Quantum Mind and Social Science: Unifying Physical and Social Ontology |publisher= Cambridge University Press | isbn= 978-1107082540}}</ref>

In financial applications, neoclassical economics is associated with efficient market theory, where price is assumed to reflect intrinsic value with a degree of random noise due to new information. In quantum economics, price fluctuations are seen as being due to fundamental uncertainty.<ref>{{cite news |author= |date= 6 November 2021|title= Schrödinger's markets |newspaper= The Economist}}</ref>

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 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.<ref name=orrellbook /> Quantum economics can therefore be viewed as an alternative to neoclassical economics which begins from a different set of assumptions.

== References ==
{{Reflist}}

{{Quantum mechanics topics}}
{{Economics}}

[[Category:Mathematical economics]]
[[Category:Quantum mechanics]]

{{Sourceattribution|Quantum economics|1}}

Physics:Quantum economics - Revision history

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