This book had as its main objective to discuss how (quantum) physics concepts could be used in a relevant way in the modeling of a variety of economics/finance and psychology-based processes. For those readers who have come to read this conclusion, without skipping its “backbone,” we would like to say “thank you” for keeping with us until the end. The possible claim, which says that social science driven dynamics would need analyzing with techniques from the natural sciences, may well have been tempered with this book. Although quantum physics as a theory of prediction is one of the most successful theories humankind ever devised, it is not unreasonable to suggest that the number of foundational interpretations of quantum physics is sizable. Consider now the following natural question: “How can a theory with such a wide diversity of foundational interpretations serve to inform and elucidate a non-cognate area of research (like economics or psychology)?” Indeed, we should want to stand upright and write, without hesitation, the words “non-cognate.” No theory in social science can come close to the predictive power of quantum physics. However, very few social science theories are “plagued” by foundational issues of such depth as quantum physics. As an example, consider the issue of why quantum physical wave functions do have to be complex valued. Do physicists have a satisfactory answer to this very basic question? A theory of such predictive power has a partial differential equation, the Schrödinger equation, which cannot be rigorously derived. However, in economics and finance we strive to build theoretical edifices with the utmost respect for rigor.
This book had as its main objective to discuss how (quantum) physics concepts could be used in a relevant way in the modeling of a variety of economics/finance and psychology-based processes. For those readers who have come to read this conclusion, without skipping its “backbone,” we would like to say “thank you” for keeping with us until the end. The possible claim, which says that social science driven dynamics would need analyzing with techniques from the natural sciences, may well have been tempered with this book. Although quantum physics as a theory of prediction is one of the most successful theories humankind ever devised, it is not unreasonable to suggest that the number of foundational interpretations of quantum physics is sizable. Consider now the following natural question: “How can a theory with such a wide diversity of foundational interpretations serve to inform and elucidate a non-cognate area of research (like economics or psychology)?” Indeed, we should want to stand upright and write, without hesitation, the words “non-cognate.” No theory in social science can come close to the predictive power of quantum physics. However, very few social science theories are “plagued” by foundational issues of such depth as quantum physics. As an example, consider the issue of why quantum physical wave functions do have to be complex valued. Do physicists have a satisfactory answer to this very basic question? A theory of such predictive power has a partial differential equation, the Schrödinger equation, which cannot be rigorously derived. However, in economics and finance we strive to build theoretical edifices with the utmost respect for rigor.
In the Preface to this book, we started with Alice and Bob having very different views of their observations. Alice used an optical telescope and reported nothing unusual about a distant galaxy that she could see. Bob, on the other hand, detected intense radio activity in that galaxy. Our question was: who has the true view of that galaxy? We advised the reader that the answer is not Alice . Neither is it Bob . The answer is not both of them , nor is it neither of them . It is not a trick question either. So what is the answer that this book would supply? Our answer will come presently. While this book has set forth a definite mathematical perspective on empirical physics, it has contained quite a lot of commentary that might be disparaged as metaphysics or philosophy. Such commentary is generally frowned on in science, because it has no empirical content. It is vacuous. In our defense, we point out the obvious: science is not a robotic activity; it is carried out by humans and these are driven by their metaphysical, philosophical, and emotional imperatives. For instance, the hard-core scientific view that quantum theory needs no interpretation but only application is itself a philosophy. It is no more than a conditioned response, based on opinion and subscription to current scientific norms. It is, indeed, a philosophy of how to do quantum mechanics. So we all do it, in one way or another. Our concern in this book is that the way that we do it should be based soundly on scientific principles. The quantized detector approach that we describe and use in this book is our attempt to do just that. There is an excellent paper on all of this that has the provocative title “Quantum Theory Needs No Interpretation,” by Fuchs and Peres (2000). It seems on the face of it to dismiss any sort of “interpretation” of quantum mechanics. In fact, close reading of it confirms (to us at least) the agenda that we have set out in this book. Yes, quantum mechanics needs no interpretation, when it is being applied to processes that take place in the information void .
This concise and self-contained book opens completely novel areas of research by directly implementing concepts from quantum physics into areas of social science. It constructs compelling arguments originating from fundamental concepts in physics and the philosophy of science, including key developments in economics and finance, then surveys the important work which has been performed to date through applying the formalism of quantum mechanics to decision making and finance. The book is accessible to graduate students and researchers in social science and physics, as well as avid interdisciplinary readers. This title is part of the Flip it Open Programme and may also be available Open Access. Check our website Cambridge Core for details.
Abstract This is the world’s first general-audience work to systematically rewrite the underlying logic of economics through quantum thinking. Since Adam Smith, economics has rested on the foundation of Newtonian mechanism: human beings are rational atoms skilled at calculation, resources are scarce stocks with fixed attributes, prices tend toward equilibrium, and markets clear automatically. Yet the rise of behavioral economics shattered the myth of homo economicus, and the 2008 financial crisis, platform economies, free goods, asset-price bubbles, and the repeated tug-of-war between inflation and expectations have again and again exposed the limits of the classical framework’s explanatory power. The problem is not that a particular conclusion needs patching; it is that the entire worldview needs updating. This book argues that what quantum mechanics contributes to economics is not a set of fashionable metaphors, but a rigorous intellectual structure for handling multiple coexisting possibilities, observation that participates in generation, relations that precede entities, and a whole that is greater than the sum of its parts. From this perspective, resources are probability clouds of possibility waiting to be activated by cognition, and scarcity is the result of observational collapse; human nature is a superposition of the rational and the irrational; decision-making is measurement rather than revelation; supply and demand are mutually entangled, and prices oscillate around coherent states rather than settling at static equilibrium; money is an entangled carrier of trust, and institutions are the coherent emergence of economic systems. The book consists of an introduction and six parts comprising forty-two chapters. Part I accomplishes the worldview leap from Newton to the quantum; Part II reinterprets individual choice and cost; Part III dissects the entanglement mechanism of supply, demand, and price; Part IV examines money, cycles, and market networks; Part V rebuilds the theory of value and welfare; Part VI leads to the emergent landscape of property rights, policy, and institutional civilization. Each chapter follows a “break before build” approach: first dismantling a widely held classical myth, then offering a more explanatory answer within the quantum framework, supplemented by real cases spanning ancient and modern, Chinese and foreign history, thought experiments, comparative charts, and chapter-end key takeaways, discussion questions, and further reading. With masterful and penetrating prose, the author makes cutting-edge theory accessible and compelling. Whether you are a researcher or graduate student in economics, management, finance, or decision science, or a general reader hoping to see through the workings of wealth, markets, and society, this book will change the lenses through which you view the world—afterward, the economic world will never look the same.
Written by world experts in the foundations of quantum mechanics and its applications to social science, this book shows how elementary quantum mechanical principles can be applied to decision-making paradoxes in psychology and used in modelling information in finance and economics. The book starts with a thorough overview of some of the salient differences between classical, statistical and quantum mechanics. It presents arguments on why quantum mechanics can be applied outside of physics and defines quantum social science. The issue of the existence of quantum probabilistic effects in psychology, economics and finance is addressed and basic questions and answers are provided. Aimed at researchers in economics and psychology, as well as physics, basic mathematical preliminaries and elementary concepts from quantum mechanics are defined in a self-contained way.
ConclusionsIn the Preface to this book, we started with Alice and Bob having very different views of their observations.Alice used an optical telescope and reported nothing unusual about a distant galaxy that she could see.Bob, on the other hand, detected intense radio activity in that galaxy.Our question was: who has the true view of that galaxy?We advised the reader that the answer is not Alice.Neither is it Bob.The answer is not both of them, nor is it neither of them.It is not a trick question either.So what is the answer that this book would supply?Our answer will come presently.While this book has set forth a definite mathematical perspective on empirical physics, it has contained quite a lot of commentary that might be disparaged as metaphysics or philosophy.Such commentary is generally frowned on in science, because it has no empirical content.It is vacuous.In our defense, we point out the obvious: science is not a robotic activity; it is carried out by humans and these are driven by their metaphysical, philosophical, and emotional imperatives.For instance, the hard-core scientific view that quantum theory needs no interpretation but only application is itself a philosophy.It is no more than a conditioned response, based on opinion and subscription to current scientific norms.It is, indeed, a philosophy of how to do quantum mechanics.So we all do it, in one way or another.Our concern in this book is that the way that we do it should be based soundly on scientific principles.The quantized detector approach that we describe and use in this book is our attempt to do just that.There is an excellent paper on all of this that has the provocative title "Quantum Theory Needs No Interpretation," by Fuchs and Peres (2000).It seems on the face of it to dismiss any sort of "interpretation" of quantum mechanics.In fact, close reading of it confirms (to us at least) the agenda that we have set out in this book.Yes, quantum mechanics needs no interpretation, when it is being applied to processes that take place in the information void.
Our central proposal in the book is that general quantum-like principles guide life in totality. By totality, we mean both physical and psychological lives. Our philosophical stance is inclined towards dual-aspect monism, with a psycho-physical neutral reality underlying. However, we observe that such reality cannot be directly represented, or even conceived; only its contextual aspects can be observed. Also, the relation between such contextual aspects (simply put, mind and body) can be complex and multi-layered. We also maintain that quantum-like principles need to be conceived in the atmosphere of complex adaptive systems (CAS), and we turn to this open area of study in the sections below. We observe that in the last decade, there has been a surge of interest in quantum-like framework (QLF) in domains of political science, particularly in international relations (Der Derian and Wendt, 2020 , 2022 ). Scholars observe that Newtonian realism has to be overcome in the social sciences. It is surprising that multiple social sciences, particularly economics, are still visibly influenced by neoclassical realism, where the latter can almost be conceived as applied classical physics. The history of such a neoclassical approach to economic science is complex. Even though Newtonian-Hamiltonian formalism has always influenced equilibrium modelling in economics, some early founders of microeconomics, for example Alfred Marshall ( Cory Jr, 2022 ), thought that biology should be the central motivation for understanding economic life. We have already discussed the bio-cosmology view, which challenges the ergodic hypothesis of classical thermodynamics. In economics, 1 we find many features which are quantum-like and complex-adaptive.