Dealing with Worsening Macroeconomic Conditions: Insights from Quantum Physics

Economists, central bankers, and governments must be careful on their following actions. History has shown us that Macroeconomic workhorse models were not enough to show what was going on in the real world. Some of us may have remembered the inflation narratives during the recent surge in 2021 up to 2022 that inflation is transitory. Yet, it shows no signs of slowing down. 

Meanwhile, the Federal Reserve Bank of New York published a report in March 2022  titled "Drivers of Inflation: The New York Fed DSGE Model's Perspective". The model shows that inflation is largely transitory (which is false) or it might persist in the medium term (only time will tell). However, the report states that it has omitted many aspects of reality and it just shows us that inflation right now is cost-push.

 

Insights from Quantum Physics

 "The real reason economists didn't see the crisis coming was because they ignored its (money) entangled, quantum nature." -- David Orell

 The term 'quantum' has a long history. Over a century ago, physicists used it to describe the exchange of energy between subatomic particles. And it ultimately disproved our most fundamental ideas about the universe by demonstrating that it was not a deterministic machine, but rather something more alive, intertwined, and complex.

Classical or Newtonian physics, which was widely accepted in the early 20th century, was based on the notion that matter was made up of protons and neutrons that only interacted by bouncing into one another. 

Deterministic rules might be used to understand and predict the movement of these particles. Quantum physics changed everything by demonstrating that quantities like position and momentum were fundamentally indeterminate and could only be roughly evaluated through a method that affected the object being measured and appeared to some theorists to depend on the choices made by the people performing the measurements.

 To better economic models, a quantum approach needs to be adopted. By definition, quantum physics is the study of matter and energy at the most fundamental level. In this context, economists must view economics from the smallest bit, with its fundamental level, money. However, the problem of mainstream economics is that money is never included in the workhorse model. 

 The quantum theory of money was proposed by David Orell in his book Quantum Economics. Money should be viewed as the primary driver of the economy, rather than merely a vehicle of transaction. 

Money objects are entities that have a monetary value associated with them. Due to the basic difference between number and value, such money objects show dualistic features. For anything other than money objects, the link between value and price arises indirectly from the usage of money, and it is an emergent attribute that is influenced by a wide range of social conditions (Orell, 2016).

 Money objects, because of their dual real or virtual nature, have one foot in the abstract realm of numbers and computation and the other in the actual world of tangible things.