The value of value: A quantum approach to economics,security and international relations

Introduction

What is it that causes most conflict at every level of social interaction, from the family, to the village, up to the management of the city, the state or international organizations? It is the control of money.

Like a quantum particle, a word’s meaning cannot usually be reduced to a single definition, but exists in a superposition of states whose measurement is context dependent. According to one well-known online dictionary, ¹ three main meanings of the word ‘value’ are:

The first and third aspects of the word – a sense of worth or utility and a numerical amount – have very different properties (we return to the second meaning below). For example, numbers are stable and unchanging (the number three was the same in ancient Greece as it is today); are linear and additive (2 + 2 = 4); are virtual and cannot be owned or possessed; and represent an exact objective quantity. Our sense of worth or utility, in contrast, is variable and context dependent; does not obey simple mathematical laws; is associated with real ownership (as in a valued object); and is fuzzy, subjective and imprecise. The money system can be viewed as a way of mediating between these two senses – of finding the value of value. In particular, money objects – be they real coins or virtual bitcoins – are unique in that they are ownable objects with a fixed numerical value.

The complementary nature of the dual aspects of value, which compares with the dual wave/particle nature of quantum entities, is what leads to the dualistic and sometimes conflicting properties of money (Orrell, 2016; Orrell and Chlupatý, 2016). This article will argue that the money system in general shows the same kind of behaviour that so puzzled physicists when they encountered it in their studies of subatomic particles at the start of the 20th century. Rather than being either loosely analogous to quantum physics or somehow reducible to quantum processes, it is better understood as exhibiting its own version of quantum properties, which do not just affect individual behaviour but scale up to the global level, with very real implications for international relations and security. Because these properties are not consistent with the classical traditional view of the economy as a kind of rational machine, one consequence today is that even as complex financial instruments such as derivatives have increasingly usurped ‘the economic functions once normally carried out by national states’ (LiPuma and Lee, 2004: 105), they have been allowed to do so with little scrutiny from economists or social scientists in general.

An outline of the article is as follows. Following this introduction, the article’s second section illustrates the relevance of money to the field of international relations through the use of three case studies from financial history that focus on the role of a risk-free security. The third section explores the meaning of ‘quantum’ in the context of economics, and the fourth gives a summary overview of the quantum nature of the money system. The fifth section discusses how quantum social science was first applied to explore the roles of cognition and consciousness, while the sixth describes applications in finance and argues that fields such as quantum cognition and quantum finance need to engage with the topic of money in order to present a genuine alternative to classical theory. Finally, the seventh section examines some of the objections to the quantum approach and argues that in order for the quantum viewpoint to influence economics, and other areas including international relations, a first step is to bring money back into the picture.

Before proceeding, a quick disclaimer may be in order: The article is written from the perspective of an applied mathematician working in quantum economics, as opposed to that of an international relations scholar, and is based on a presentation given for an interdisciplinary seminar on quantum approaches to the social sciences. The aim is therefore to offer a new approach from outside the canon of international relations to a neglected yet critical topic, the value of money; to suggest useful heuristic applications for quantum finance, cognition and security; and to consider some possible objections to the adoption of quantum approaches to economics, security and international relations.

Quantum security

It might seem that the topic of money, and in particular a quantum theory of money, has little to do with international relations or security. Indeed, even in economics, finance is usually treated as a somewhat specialized subject. However, to bring out the dictionary another time, the two main meanings (or eigen-meanings, in the sense discussed below) of the word ‘security’ are ‘the state of being free from danger or threat’ and ‘a thing deposited or pledged as a guarantee of the fulfilment of an undertaking or the repayment of a loan, to be forfeited in case of default’. ² As Boy (2015: 537) notes, there is a direct relationship between these two meanings, since the definition of a risk-free asset (so something with a constant intrinsic value) ‘is not only a critical element in the pricing of stocks and derivatives, but serves as a benchmark for valuing any financial asset: its inconspicuous existence, subsumed by the general focus of modern finance theory on asset pricing and the calculability of the future, has only begun to attract attention through the sovereign debt crisis in the wake of the global financial crisis’.

Der Derian (1995: 152) also considers the connections between the word’s different uses, including that from Markby’s (1874) Elements of Law: ‘to express any transaction between the debtor and creditor by which the performance of such a service (one capable of being represented in money) is secured’. To illustrate how theories of money and value can affect international relations, and motivate the development of a new quantum approach, we briefly consider three case histories – two from the 17th century and one from the recent financial crisis – all of which hinge on the idea of security.

Quantum information

The meaning of the word ‘quantum’ is, like that of ‘value’, both unstable and debated. In physics, as Lemos and Schaffer (2019) point out, there is no single quantum ontology, but instead a range of different interpretations. In the social sciences, the situation is of course even more contested. While readers will bring their own interpretations, this section will describe the approach used here to describe economic phenomena.

One common interpretation, when ‘quantum’ is used outside of physics, is that the word is being employed as a metaphor: we say that the behaviour of social systems in some respects resembles that of subatomic particles. However, this seems to be the wrong way round, because the usual purpose of a metaphor is to explain something that is difficult or abstract in terms of something that is more simple and concrete. When Shakespeare had an actor read ‘All the world’s a stage’ in As You Like It, he was comparing the vastly complex world to a wooden platform on which the actor was actually standing. In quantum physics, we might think of a wave function as real because it can be expressed using mathematical equations, at least for the most simplified of situations. But no one has actually seen or felt an electron’s wave function (for one thing, it involves imaginary numbers). So, at the risk of anthropomorphizing nature, it would actually make more sense as a metaphor to go the other way and say that subatomic particles behave like social systems.

Another interpretation is the physicalist approach, which asserts that the brain and consciousness in general are based on quantum processes (see, for example, Penrose, 1989), so we are literally ‘walking wave functions’ (Wendt, 2015: 3). As Wendt points out, this approach is bolstered by experimental evidence (see Lambert et al., 2013) that quantum effects play a role in biological phenomena such as photosynthesis or avian navigation.

Finally, there is the quantum-like modelling approach, popular among researchers working in quantum cognition, which is to make clear that they are using quantum models only for their mathematical properties and are not asserting that brain processes are quantum (see, for example, Khrennikov, 2015). Instead, according to Accardi et al. (2008: 1), ‘the basis of the quantum-like paradigm consists in understanding that the mathematical apparatus of quantum mechanics and especially quantum probability is not rigidly coupled with quantum physics but can have a wider class of applications’. Some authors relate this approach to the quantum information interpretation of quantum mechanics (Nielsen and Chuang, 2000; Wheeler, 1990), but, as Bagarello et al. (2017) note, this connection is not typically emphasized.

The terrain is made even more complicated by the fact that use of the word ‘quantum’ outside of physics is generally viewed by physicists as problematic, in part because of things like ‘quantum healing’, in part because of physicists being protective of their turf, and in part because of the Platonic tendency in science to confuse models with reality (Orrell, 2012). The physicalist and the quantum-like approaches can be viewed as two responses to this: the first sees the social sciences as embedded in physics, while the latter makes it clear that the intention is only to exploit a set of mathematical instruments, and often treats any connection between social sciences and physics as unexplained, coincidental or simply out-of-scope.

As seen in the next section, the approach in this article is a little different because it says that the money system is quantum in the same way that the subatomic world was seen as quantum by physicists and mathematical modellers in the early 20th century, in that it exhibits properties such as interference and entanglement that elude classical analysis and demand a quantum treatment. One difference between the money system and physics, of course, is that the money system operates at the macroscopic scale; another is that the money system is a quantum social technology that we have designed ourselves.

The physicalist interpretation therefore does not apply, because the assertion that money is quantum does not rely on complex physical experiments to prove it true or false: we invented the system, so can check for ourselves. Conversely, showing that brain processes exploit quantum properties would certainly change the conversation around quantum effects in the social sciences, but it would not prove that money has such properties, too; nor would it affect the way we model the financial system, which is the topic here, any more than knowing that birds exploit quantum effects to navigate – or, for that matter, that GPS systems in cars exploit relativistic effects to determine location – would mean that birds or traffic are best handled using quantum field theory. As physicist Robert Laughlin notes, the laws of hydrodynamics cannot be deduced from first principles – ‘the reason we believe them, as with most emergent things, is because we observe them’ (Laughlin, 2005: 40) – and the same is true of economic phenomena. We return to this topic in the final section.

The approach here more closely resembles the quantum-like paradigm, except that (and this is more a matter of style or emphasis) this article dispenses with the qualifier ‘like’: it treats quantum methods not as tools that are borrowed from physics, but as a set of mathematical techniques that, as computer scientist Scott Aaronson (1999) notes, are adapted to handle ‘information and probabilities and observables, and how they relate to each other’. Many key elements of quantum mechanics, such as the Hilbert space, were developed by mathematicians before they ever found use in quantum physics. The primary application for quantum models is therefore not subatomic particles but information. In this view, quantum social properties are not inherited from those of subatomic particles but should be taken at face value. And the fact that the same tools work for both subatomic systems and the money system is not coincidence but a sign that the common currency of the social and physical worlds treated by these models is information. Note that this is not the same as saying that reality itself is information, because the model is not the system. The reason we associate these tools with physics is purely historical – because they were applied there first.

Quantum money

While, as mentioned above, this approach, which might be described as the informationalist approach, is based more on applied mathematics than physics, comparisons with quantum physics are at the same time certainly helpful and worth exploring, if only for illustration. Starting with perhaps the most obvious, the key discovery that led to the development of quantum physics was that energy is transmitted in discrete amounts, or ‘quanta’, rather than continuously (Einstein, 1905). ³ The same is true, of course, for money. When you receive your pay packet, there isn’t a little needle that shows the money draining into your account. Instead, it goes as a single discrete lump. Similarly when you use your credit card at a store, or when a bank creates new funds by issuing a loan (Jakab and Kumhof, 2015: ii). And it is impossible to make payments smaller than a certain amount, such as a cent.

In physics, this discovery eventually led to the idea that matter has complementary wave/particle attributes. In the standard Copenhagen interpretation, attributes such as position and momentum are indeterminate, and are revealed only upon measurement (according to some versions, by a conscious observer), with a mathematical wave function specifying the probability of each possible value being observed. Again, the money system is similar. The value of something like a house is fundamentally indeterminate and only takes on a precise value when the house is exchanged for money, in the economic version of a measurement procedure. In finance, the price and momentum of a stock can also only be measured through transactions, which in turn affect these variables. Of course, most items come with a price tag, but even here the price is subject to change and is only confirmed at the moment of purchase. Offering a product for a particular price gives little information about its worth if there are no buyers.

One of the more mysterious aspects of quantum physics is the fact that particles can become entangled, so that a measurement on one can instantaneously inform an experimenter about the state of another, even if it is located on the other side of the universe – a phenomenon Einstein mocked as ‘spooky action at a distance’ (Kumar, 2008: 348). Despite Einstein’s scepticism, entanglement was shown to be real in a serious of ingenious experiments that teased out mathematical correlations between the spin states of entangled particles. With money, entanglement is less controversial or difficult to test. A loan agreement, for example, constitutes a single system that includes both the debtor and the creditor. If the debtor’s decision to default is modelled using the quantum formalism as in quantum cognition (see the next section), then the loan agreement can be expressed as a single wave function, in which the states of the debtor and creditor are indeterminate but linked (Orrell, 2018a, 2018b).

Perhaps the biggest form of entanglement, one that played a key role in both the financial crisis and the ensuing eurozone crisis, consists of financial derivatives, whose nominal value has been estimated at over a quadrillion dollars (Wilmott and Orrell, 2017: xiv). These allow businesses or investors to hedge against, or bet on, things like currency fluctuations or company defaults. It may have been hyperbole when Warren Buffett called derivatives ‘weapons of mass destruction’, but they can certainly destroy lives and economies, and pose a threat to financial stability and therefore national security. Yet these instruments were developed with little regard for the complex social dynamics of credit systems (LiPuma and Lee, 2004), on the part of economists or social scientists in general. As Graeber (2018: 150) notes, ‘financiers had managed to convince the public – and not just the public, but social theorists, too (I well remember this) – that with instruments such as collateralized debt obligations and high-speed trading algorithms so complex they could be understood only by astrophysicists, they had, like modern alchemists, learned ways to whisk value out of nothing by means that others dared not even try to understand’. Since most money is today created through loans from private banks, similar entanglements characterize the money supply in general.

Another basic property of quantum systems is that they show interference. The most famous example is the double-slit experiment (Taylor, 1909), in which photons produce an interference pattern even when they pass through the slits individually. Money objects, of course, do not show such effects themselves; we know a ten-dollar bill is worth exactly ten dollars, and it doesn’t interfere or cancel out if we put it next to a five-dollar bill in our wallet. But while their fixed nature means that money objects can’t interfere with one another, they can certainly produce interference effects in the human mind, as seen next. The reason is that money objects are used to measure subjective value, which is something that can only be felt or experienced by a conscious individual.

Quantum cognition

Perhaps the first to connect the quantum approach to this subjective decision-making process, at least in an academic paper, was the mathematical physicist Asghar Qadir (1978), who argued that instead of modelling people as mechanistic particles, pushed and pulled by forces of utility and disutility, as with the ‘rational economic man’ of neoclassical economics, it made more sense to model them as quantum entities, with a psychological state described by a social version of a probabilistic wave function and decisions represented by wave function collapse.

Qadir’s idea re-emerged separately in the 1990s in the field known as quantum cognition, and in recent years there has been growing interest among psychologists and others in the quantum approach, which has proved useful for explaining not just our numerous departures from perfect rationality but also the nature of thought processes in general. According to cognitive scientists Jerome Busemeyer and Peter Bruza (2012: 3), ‘the wave nature of an indefinite state captures the psychological experience of conflict, ambiguity, confusion, and uncertainty; the particle nature of a definite state captures the psychological experience of conflict resolution, decision, and certainty’. While many questions will have a straightforward answer, others evoke a more complex response that needs to be constructed at the time and so depends on the particular context. And just as a particle’s behaviour is affected by measurement, so our own behaviour is affected by being asked questions. Rather than following classical logic, this argument suggests, we are better described as following a kind of quantum logic.

An example of such effects was a well-known experiment where psychologists offered subjects a game in which they had an even chance of either winning $200 or losing $100 (Tversky and Shafir, 1992). After playing once, they were offered the chance to play again. If they were told that they had won the first game, 69% decided to gamble their winnings, perhaps because they thought they had a hot hand or were playing with free money. If they knew they had lost, then 59% played another round. But if they were not told the result, then only 36% opted to repeat. According to expected utility theory, the answer should be the average of the first two possibilities, which is 64% – a striking difference from the observed number.

This so-called disjunction effect applies to many other situations in which one is trying to choose between a number of options with uncertain outcomes. It can be explained using behavioural psychology by saying that winning or losing the first round provides a reason for playing again – having a hot hand, the desire to win back losses – while if the result is not known then no such reason is supplied. But a more elegant solution is to model the response as a quantum process. The decision to play a second time is entangled with the result of the first game; and when this is unknown, the uncertainty between a positive reason (having a hot hand) and a negative reason (desire to win back losses) creates a kind of mental interference pattern that affects the decision-making process. As Busemeyer and Bruza (2012: 267) note, the situation is ‘analogous to wave interference where two waves meet with one wave rising while the other wave is falling so they cancel out’.

Another cognitive effect that eludes classical analysis is the so-called order effect. Pollsters and survey writers have long known that the answers they receive depend on the exact wording of their questions, but also on their order: the response to the first question changes the context for the second question, where here the context includes the responder’s own state of mind. Qadir (1978: 126) made a similar statement in his 1978 paper when he posited that a consumer’s choice ‘will depend, among other things, on the order in which his requirements for various commodities are found out’.

One example was a 1997 Gallup survey that asked whether Bill Clinton was trustworthy, and the same for Al Gore (Wang et al., 2014). The number of people who described them both as trustworthy was 49% if Clinton was named first, but rose to 56% if Gore was named first, a difference of 7%. Conversely, the number who described them both as untrustworthy was 28% if Clinton was named first, but fell to 21% if Gore was named first, again a difference of 7%. So the increase in joint trustworthiness was balanced by a decrease in joint untrustworthiness – a feature that was found to hold for other such surveys as well. Wang et al. (2014) simulated this effect using a quantum model in which the person’s state is treated as a 2-D vector, which collapses onto the yes/no decision states for Clinton and Gore, represented by two sets of axes. The quantum model predicted that the yes–yes versus no–no symmetry will always hold because it is a structural feature of the model.

The well-known game of the prisoner’s dilemma (see Wendt, 2015: 172), where two prisoners are given a choice to act as informants in return for a reduced sentence, gives one answer if the prisoners are assumed to follow classical logic (they both snitch on each other), and another if they are assumed to follow a quantum logic (their behaviour is affected by entanglement through things like social norms). James Der Derian taught the game to convicts from Gardner State Prison in a world politics class he was holding there, and in turn was ‘taught a lesson’ about the prisoner’s dilemma when it turned out that they based their decisions on established prison norms such as ‘traditional codes of silence, pre-scripted stories, and intersubjective rituals of honor’ that make sense in the quantum picture (Der Derian, 1998: 117).

One might think that such cognitive effects are of little relevance to the world economy, but the prisoner’s dilemma is taught in economics classes exactly because it relates to phenomena such as the dynamics of cartels. Another example is the phenomenon known as preference reversal, where we change our mind about a question depending on the context (Tversky and Thaler, 1990). As a real-life illustration, consider the observed rate of strategic default during the US housing crisis. According to objective utility maximization, owners should default if the projected costs associated with staying in a home exceed the costs associated with selling it, and surveys did indicate that homeowners were ready to do so if this were the case (Guiso et al., 2013). However, when homeowners were actually faced with a real decision, their preferences reversed, to the point that the median borrower only defaulted when they were underwater by 62% (Bhutta et al., 2010: 21). This reversal is hard to explain from a classical utility-maximizing perspective but is consistent with an estimate derived from a quantum approach, which takes interference between objective and subjective factors, such as fear and guilt, into account (Orrell, 2019).

Other studies have shown that a broad range of cognitive phenomena, discovered initially by behavioural psychologists, can be modelled in a parsimonious way using the quantum approach because of the natural way in which it can account for effects such as context, interference and entanglement (Busemeyer et al., 2015). This formalism extends naturally to economics: a person’s decision, for example, to buy a stock, or default on a loan, or sell their company, can be modelled as the collapse of a context-dependent wave function (Orrell, 2018b, 2020). When combined with the quantum properties of money, this implies that the money system as a whole can be viewed as a quantum system in its own right, with interference effects arising from the role of conscious participants. In particular, money acts as a vector that transmits and amplifies the quantum characteristics of human cognition to the global level, with significant implications for international relations. It is the social equivalent of an atomic device – a quantum technology with the ability to help power us or destroy us.

Quantum finance

Given the rather obvious and direct connections between money and quantum reality, it is curious that the money system’s remarkable properties such as complementarity, indeterminacy, entanglement and interference have received so little attention in economics. The only one of these characteristic properties that has been influential is that of indeterminacy, which was accommodated by allowing for stochastic uncertainty in otherwise deterministic models – part of the so-called probabilistic revolution in science (Krüger et al., 1990). In finance, the stochastic approach (see Cootner, 1964) formed the basis for key results, including the efficient market hypothesis (Fama, 1965) and the Black–Scholes equation for valuing options (Black and Scholes, 1973). The connection with quantum physics was later rediscovered – and taken further – by researchers working in the field of quantum finance, which applies the quantum formalism to the modelling of financial assets such as stocks and bonds (as opposed to money per se).

It was found, for example, that the Black–Scholes equation is a close relation of Schrödinger’s wave equation for the special case where markets are assumed to be efficient (Haven, 2003). Under certain conditions, the markets even get their own version of an uncertainty principle, expressed this time in terms of the uncertainty in the price, multiplied by uncertainty in momentum (Baaquie, 2007: 99). And financial transactions in something like a stock market can be described in a very natural way using the formalism of quantum field theory. Schaden (2002), for example, showed how investor portfolios can be interpreted in terms of wave functions in a Hilbert space. The purchase or sale of securities is modelled using the same operators as those used to simulate the creation or annihilation of bosons in a multi-body quantum system.

The difference between quantum finance and traditional quantitative finance is best illustrated by the concept of a security’s ‘intrinsic value’. The point of a ‘risk-free’ security, after all – whether it is a gold sovereign in the era of the gold standard or a Treasury bond today – is that it has a fixed and dependable intrinsic value, and this sense of intrinsic value feeds into prices through markets. One standard definition of an efficient market, for example, says that ‘the price of an asset reflects all relevant information that is available about the intrinsic value of the asset’ (Jones and Netter, 2017). The quantum version would state that the price corresponds to an eigenvalue of the system, in the sense of a possible value. The word ‘eigenvalue’ comes from the German eigen for ‘own’ or ‘inherent’, and thus means something similar to ‘intrinsic value’, though there can be more than one such value (indeed, there may be infinitely many).

To summarize, researchers have separately found that both human cognition and the behaviour of markets are amenable to a quantum treatment. So far, the quantum formalism has mostly been used to duplicate known results from behavioural psychology or finance – the approach may be more elegant, but it isn’t always clear what the practical advantage is. The point again, though, is not that the financial system bears some superficial resemblance to quantum physics; instead, it is that, as a particular form of information transfer, it has properties that demand that it be treated as a quantum system in its own right. This has implications for the kinds of mathematical models used, but also for the way we think about the economy in general. Experiments of human cognition often involve the use of money as a reward, and finance (quantum or classical) uses money as a metric, but its properties tend to be taken for granted. However, money objects are the link that connects economic decision-making with price changes in the market. Existing in the gap between economics, quantum social science and international relations, money is like a kind of connecting tissue that is invisible to conventional scans yet plays a vitally important role. It is the entangling properties of money and credit that weave the complex – and ever-growing – system of connections that have long played a key role in international relations. And, as with any quantum system, it is affected by context, which, as already seen, includes our theories of money.

Most money today is produced not directly by the state but by private banks – in the UK, for example, the figure is about 97% (McLeay et al., 2014) – and financial standards are enforced not just by international agreements but also in large part by complex financial derivatives that mediate between different currencies and financial products, at the same time that the traditional simple relation between national currency and nation-state has become blurred (Cohen, 2000). Calculations of risk premiums for individual countries are far from impartial but are affected by numerous preconceptions and cultural biases (LiPuma and Lee, 2004: 57), in a large-scale version or relative of the disjunction effect, where our perception of risk depends on context and the stories we tell. Bond traders are subject to their own version of the prisoner’s dilemma, where the ‘first-redeemer advantage’ impels them to redeem bonds at the first hint of a crash, thus increasing the chance of a crash (Guthrie, 2016). The earlier-mentioned preference reversal on the part of US mortgage holders prevented a potential mass default on debts that, according to one bank’s estimate, were collectively worth some $745 billion (Streitfeld, 2010). And derivatives similarly rely for their function on the highly complex, coupled social phenomena of trader psychology and financial entanglement.

Based as they are on a classical view that treats the economy as a kind of mechanistic barter system (Samuelson, 1973: 55), mainstream economic models have a blind spot when it comes to all such phenomena that involve the complex, quantum properties of money and debt. According to Werner (2016: 376), the topic of money creation through private bank loans, for example, ‘has been a virtual taboo for the thousands of researchers of the world’s central banks during the past half century’. Häring (2013: 17) similarly noted that ‘cursory observation suggests that credit creation or money creation are taboo words in the leading journals’. As Vítor Constâncio, vice president of the European Central Bank, pointed out in a 2017 speech, one reason dominant economic models couldn’t predict the crisis of 2007–08 was because they ‘ignored the fact that banks create money by extending credit ex nihilo’. More generally, ‘in the prevalent macro models, the financial sector was absent, considered to have a remote effect on the real economic activity’. Indeed, a working assumption in macroeconomic models has long been that the possibility of default, let alone mass default, can be ignored (Goodhart et al., 2016). It is hard to predict a financial crisis – or understand its effects on the global economy – when the models don’t include money creation, debt, default, banks or a quadrillion dollars’ worth of derivatives.

Neglect of these effects leaves a curious void in our treatment of international financial affairs, which quantum social science can help to fill. To return to the question of a financial security from the second section of this article, one of the main contributions of quantum social science is to highlight the importance of effects such as uncertainty and entanglement, which find perhaps their most powerful and direct expression in finance. It is probably the case that the sophisticated derivatives that supposedly underpin the international financial order are simply too complex to properly value (which, in terms of a security, is much worse than using the wrong metal, as in the gold standard). As one more connection with the fields of security and international relations, it should also be noted that if the financial system is quantum, then the advent of quantum computers as tools to interpret it will both drive adoption of quantum methods – it is probably no coincidence that the mathematician John von Neumann published his book on expected utility theory in 1944 and specified how to program a digital computer in 1945 – and bestow a first-mover advantage on those state organizations and firms who are investing in the area (Asmundsson, 2017; Orús et al., 2019).

Quantum insecurity

Quantum physics is usually described as being somehow alien: Einstein said it reminded him of ‘the system of delusions of an exceedingly intelligent paranoiac, concocted of incoherent elements of thoughts’ (Fine, 1996: 1). As the physicist Steven Weinberg said in an interview (Hossenfelder, 2018: 124), quantum mechanics ‘has a number of features we find repulsive . . . What I don’t like about quantum mechanics is that it’s a formalism for calculating probabilities that human beings get when they make certain interventions in nature that we call experiments. And a theory should not refer to human beings in its postulates.’ Yet, as we have seen, concepts such as complementarity, indeterminacy and entanglement (which have all been exhaustively verified by experiments at the microphysical level) seem quite reasonable when applied to the macrophysical world of money (even if the economic result is sometimes equally confounding). And the idea, which so repulsed some physicists, that consciousness might be a necessary part of the mix is again obvious with money, since only conscious beings can value something.

One objection to treating the economy as a quantum system is that, even if we accept that transactions are quantum in nature, that doesn’t mean the economy as a whole need behave in a quantum manner. After all, Bohr’s principle of correspondence shows that quantum mechanics should converge at large scales to its classical counterpart, and the same might be true of the economy (Hubbard, 2017). But, in physics, quantum properties do scale up by design in technologies such as computer chips, lasers, superconductors, magnetic resonance imaging, nuclear devices, and so on (see Der Derian and Wendt’s introduction and the articles by Frank Smith and Jairus Grove in this special issue). Money, too, is a designed technology, and its quantum properties scale up and affect the economy as a whole, in phenomena such as money creation, entanglement through financial instruments and mass defaults.

This does not imply that the economy can be reduced to quantum equations. The idea that a system can be broken down into parts is the hallmark of reductionist, deterministic science, but complex systems show emergent properties that need not be reducible to equations of any sort (Laughlin, 2005; Wolfram, 2002). From a quantum perspective, prices are similarly best seen as an emergent property of the money system (Orrell, 2017). They cannot, therefore, be reduced to measurements of labour, utility or anything else (though they may reflect these qualities). Nor is it possible to explain economic transactions according to some micro-founded set of laws. Finally, the assertion that the financial system is quantum does not of course necessitate the use of quantum models for every case, any more than the assertion that matter is quantum implies that weather forecasters should quantize their models of the atmosphere.

Mainstream economics, with its emphasis on independence, rationality and optimal equilibrium, is based on a classical paradigm. More than a decade on from the financial crisis, the problems of mainstream economics have been widely acknowledged, but changes have so far been mostly cosmetic. The purpose of the money system is to put numbers on the fuzzy concept of value (worth), in a way similar to the measurement procedure in physics, and treating the economy as a quantum system offers a natural framework for modelling effects such as money creation, financial entanglement, behavioural factors, and so on, all of which mainstream models struggle to address.

The quantum view of money and value has direct implications for the areas of international relations and security simply because these form the basis of our economic system; to understand relations and conflicts between countries and regions – from the United States with its privileged reserve currency, to Europe with its fragile eurozone, to China with its increasingly important renminbi and massive holdings of American debt, to Venezuela with its hyperinflating bolivar – we need to account also for financial entanglements. By incorporating money into the analysis, quantum social science can explore how cognitive effects scale up in phenomena such as financial contagion or mass defaults, shed new light on the social construction of systems of value, offer an alternative to the conventional analysis of our financial system by including social factors and question how changing ideas of money relate to the very idea of the nation-state.

To summarize, the main conclusions of this article are:

Only by understanding the money system’s dualistic, entangling, dynamic and potentially explosive effects – and by exploring its relation to value, in every sense of the word – can we accurately account for its influence over our behaviour and more safely harness its creative and transformative power.