- Paperback: 304 pages
- Publisher: Icon Books (Sept. 21 2018)
- Language: English
- ISBN-10: 1785783998
- ISBN-13: 978-1785783999
- Product Dimensions: 13.3 x 2.5 x 21.6 cm
- Shipping Weight: 399 g
- Average Customer Review: Be the first to review this item
- Amazon Bestsellers Rank: #407,230 in Books (See Top 100 in Books)
Quantum Economics: The New Science of Money Paperback – Sep 21 2018
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Rich with suggestive insights on every page and written in an accessible style, this book will both engage and infuriate its audience. For those of us who feel trapped in the professional cocoons of the like-minded, this book offers a chance to escape from the iron cages we have built.'Orrell has explained his ideas in a very lively style, providing the history and a basic explanation of the physics; and goes on to explore the various consequences of this dual nature, which neo-classical economics did not foresee. The book should be read, not only by economists but also by all decision-makers.''On the cusp of an earlier revolution, Karl Marx said all that is solid melts into air and all that is holy is profaned. Constructing a less mechanistic and even more revolutionary science of quantum economics, David Orrell proves it so. Orrell does not dabble in metaphor or metaphysics: he intellectually, persuasively and corrosively transmutates money into a quantum phenomenon. In the process, classical economics is profaned to good effect and a quantum future glimmers as a real possibility.''As money becomes more digital and diffuse, it also becomes more quantum. In this timely and illuminating book, David Orrell brings us to the frontier of where economics, physics and psychology intersect. You'll never look at money the same again!'Beautifully written, inherently ethical, and often hilarious, this book is a must-read for anyone wanting to understand the weird, and getting weirder, world of modern finance.''Reading David Orrell's Quantum Economics is equivalent to playing a game of 3-D chess against the concept of value itself. The book easily switches between physical, economic and metaphysical conceptions of value, revealing their hidden parallels and paradoxes. The result is at once an explanation of our current economic predicament, a diagnosis of how we got there and a credible guide to the sort of out of the box" thinking that is likely to get us out of it. After you've forgotten about the latest wheeze about the financial crisis, you'll be returning to this book.'"
About the Author
David Orrell is a scientist and writer of books on science and economics. According to the Sunday Times 'Orrell is an engaging and witty writer, adept at explaining often complicated theories in clear language.' His latest books are The Money Formula: Dodgy Finance, Pseudo Science, and How Mathematicians Took Over the Markets, written with Paul Wilmott; and Economyths: 11 Ways Economics Gets It Wrong (Icon Books, 2017).
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From the point of view of mathematical modeling, neoclassical theory is simply a very bad fit, more like Ptolemy with epicycles piled upon epicycles that Kepler with his ellipses, or a mysterious ether as a medium of propagation rather than Einstein’s relativity. Key assumptions of neo-classical theory, such as the “invisible hand” of the market and self-interested “economic man”, are so often blatantly wrong that economists like Milton Friedman had to corrupt the scientific method itself to justify their desired results. Today even many economists themselves admit that conflicts of interest and lack of ethical standards are a problem. Orrell describes it as a “monoculture based on flawed ideas” (p. 258).
The most critical phenomena in economics, like booms and busts, are obviously highly nonlinear and chaotic in nature, yet mainstream economics continues to insist on linear, “micro-economic” foundations and nebulous concepts like “utility”. Even worse, it creates corporations in the image of greedy “economic man”, with toxic effects when instead of serving the common good they all too often “privatize the profit while socializing the cost”. Neoclassical economics may be beautiful as an abstract theory, but it is a disastrous way to model real world economics, as proven by its failure to prevent or predict the financial crash of 2008.
Orrell focuses on this spectacular failure of mainstream economics – that it does not include a good model of money, treating money as simply a “means of exchange”, a way to lubricate a mythical barter economy. Critical concepts such as “money as debt” are ignored or sidelined, even by progressive economists like Paul Krugman. Only a few heterodox economists like Steve Keen have good models for the creation and destruction of money in modern finance and how this impacts leverage and risk, inflation and deflation, and boom, bust, or stagnation. In fact Orrell proclaims that “economics is the study of money” for all practical purposes and shows how a quantum view of money illuminates the mysteries of finance.
He identifies the basic paradox, or uncertainty, of economics as the determination of “value”. For example, Marx distinguished “use value” (= utility) versus “exchange value” (= price). These could be vastly different in some situations, yet have obvious correlations in others. For example, the use value of good air is virtually infinite, since we’d die without it, yet it so abundant the its exchange value is zero – it’s free. On the other hand, if we’re hungry and have some money, we’ll pay a good price for a good meal.
To introduce the quantum interpretation of money, Orrell reminds us that in quantum mechanics each entity is specified by a wave function, not a number, and the wave function only gives the probabilities that different numbers will be realized. This realization to an object with a numerical value happens only when a measurement “collapses” the wave function. Likewise, the price value of an item is only realized when someone buys it. That is, the act of buying a house is like a measurement in quantum mechanics, with the actual “value” of the house being indeterminant until it is purchased. The structure of the market serves as the wave function, which often covers a broad range of value when people are bargaining, but is only a spike at one value for a take-it-or-leave-it offer.
This approach does not address the issue of “use value” but it does offer a realistic framework for modeling financial decision making. In fact, Orrell suggests that the mysteries of quantum mechanics become more comprehensible if viewed as a form of quantum money transaction. For example, the notion of “entanglement” in quantum mechanics is an eerie “action at a distance” which seems to defy logic, yet in the world of money we are always “entangled” with each other in often distant, unseen, and sudden ways, as market prices change, money is created and destroyed, products and companies come and go, on so on. As an applied mathematician myself, I only wish that Orrell had developed more of the mathematics of quantum economics, such as decision making, modeling of risk, and the dynamics of economies, but he chose to keep this book at a philosophical level, omitting the math.
Personally, I take a broader view of economics. I might categorize it into three sectors: (1) biophysical (energy, resources, ecology, technology, etc.), (2) money and markets (networks, exchanges, processes), (3) social and political (law, regulations, ownership, inequality, status, satisfaction, solidarity, etc.), not just markets. Orrell also points to the failure of mainstream economics to adequately address biophysical issues like resource limits and ecological overshoot, and to social objectives like equality and happiness. He even calls on economists to optimize the fair distribution of wealth, not economic growth, questioning the bedrock objective of the current ideology. By contrast, quantum economics is a version of complexity economics, where “entanglement” means that instability is a “feature, not a bug”, as Ugo Bardi writes in the “Seneca Effect”, acting via complex networks and the feedback loops of nonlinear dynamics. That is, “market failures” are the result of bad modeling, of free-market ideology overruling good science.
Orrell concludes with a practical list of economic reforms (p. 313), but his overall conclusion is that we should “enclose economics, not extend it” (p, 279). That is, do not seek to monetize everything, as preached by so economic evangelicals. Money can be too toxic. Instead regulate by law and custom, particularly where human relationships and nature itself have already been badly damaged. Economics must be founded not just on the primitive self-interest of Ayn Rand but on the more distinctive features of humanity – “empathy, altruism, and social norms” (p. 297). It must “serve social and environmental values, not dictate to them” (p. 310). This will require a total rewrite: “every conclusion from economics has to be rethought” (p.304)