David Orrell’s Quantum Money Magic – a must-read for would-be economists

Pacey and potentially revolutionary’ Sunday Times – ‘Iconoclastic and irreverent … an exhilarating read’ The Guardian – ‘Boldly ambitious, entertaining and thought-provoking’ Observer – ‘This is not a book. This is an intellectual feast’ Nassim Nicholas Taleb

reviews of “The Dawn of Everything- A New History of Humanity” by David Graeber and David Wengrow

bomb of a book

Prominant reviewers might say the same about David Orrell’s bomb of a book. Impressive, intelligent and imaginative. Not sure they will get to read it, though. The author of bestselling Economyths is famous enough but…

Hate Mail Attractor

Orrell’s popular bestseller was a mathematician’s post-mortem of mainstream Economics. That’s as in neo-classical, orthodox, 101 equilibrium economics taught via Mankiw-type textbooks to 90-97% of economics students all over the world.

“In Economyths, David Orrell dramatically demonstrates that neo-classical economics, the basic economics still taught in our universities is absolute rubbish.” more here

Desperately Seeking General Euthanasia

If Economyths was a mathematically intellectual explosive thrown at The Equilibrium Academy, Orrell’s Magic Money Bomb is a missile prefigured to hover over The Academy, then suddenly explode into quantum memes to infiltrate it.

Beyond academia, the generally curious reader is in for a treat. If you appreciate David&David rewriting history, you enjoy this David rewriting not just economics. Orrell’s demystifying expositions let you catch up on quantum theory beyond yoga and cats. You don’t have to convert to quantum lingo to appreciate a thoughtful mathematician re-configuring big concepts like agency, objectivity or rationality from a new perspective. Especially if written as a galloping critique of generally accepted narratives , suppositions and theories like behavioural economics, game-theory and rational-choice-theory.

In his reckoning with rational man, Orrell excells in numerous economics episodes illustrating why some economists have been sending hate mails. The book entertains, educates and delights with crisp flashbacks to classical mythology, Greek philosophy, magic, alchemy and the Faustian bargain. He takes you on guided tours across logical history, hemispheric neurology, patriarchal archetypes and the Black–Scholes model to name just some of the interdisciplinary ingredients of this cocktail of ideas on quantum rocks, all spiced with anecdotal morsels like the one about revered math genius John von Neumann.

Apparently von Neumann‘s mathematical thunder was twice stolen! Hence the intellectual stoop into, as he figured, irrationally retarded economics etc. Turns out economists took decades to see the light of game theory. Not that von Neuman cared at the time. He got heroically busy flogging games of chicken to Sovereign Security. Mainstream economics did eventually embrace game theory, just as game theory started to discredit itself.

Game theory’s dependence on (logically) rational choice leaves it in an onto-epistemo-logical limbo-land of being neither necessarily true nor contingently relevant? True or not, limbo-land sounds just the sort of place quantum likes to start from.

quantum’s social life

Quantum theory is the theoretical basis of modern physics that explains the nature and behavior of matter and energy on the atomic and subatomic level. The nature and behavior of matter and energy at that level is sometimes referred to as quantum physics and quantum mechanics

whatis.techtarget.com/quantum-theory

Quantum, I now understand, is not so much about the neither-here-no-there of the cat or electron. It’s about the mode and timing of the measurement. It is not the cat, clock or electron apparently acting unpredictably like agents. Einstein famously complained about quantum endowing an electron with “free will”. Given atomic invariance relative to the human narrative, Einstein’s conceptual concern about superpositioning is expressed through what must be a rhetorical projection. If there is “free will” in Einstein’s or any human story, it would presumably have to be his free will to look and see this way or that way?

Let alone both ways, as quantum thinking does when re-framing logical contradictions into dynamic poles in search of a third force? Which turns out to be the agency of the narrator, timing and placing the observational set up?

(the experiment) …”…shows that, as Schrödinger insisted, quantum leaps are not instantaneous – they actually take about four microseconds. “In a sense the jumps aren’t jumps … you look at these finer features, you can do things that maybe you thought you couldn’t do because of these little windows of predictability.” This may eventually be useful to correct errors in quantum computing… An unexpected quantum jump could mark a mistake in calculations, and this method might allow researchers to spot the start of the jump and account for the error, or even reverse it mid-leap…”…

newscientist.com-2019 – quantum-leaps-are-real-and-now-we-can-control-them

This is how quantum seems to not just enter the equation but becomes constitutive of it? Quantum seems to explicitly implicate the observer as the interventionist , let alone instigator of the whole set, measuring the result into existence?

Working round rather than resolving uncertainty, Quantum’s reversible gates reflect the narrative’s infinite reversibility. Far from mystifyingly complex, quantum can sound like the sort of common sense narrative that reminds us there are always at least two sides to a story.

Quantum’s sub-atomic duality of the wave/particle representation can be transcribed into that of real and virtual, object and number, commodity and symbol, yin and yang, soft and hard, female and male or any two sides of a social construct. Never mind how deeply the narrative is institutionally inscribed into a state of naturalness. Duality tends to reveal the scriptedness of the object as in the famous two sides of a coin: Name and number. Power denominated.

The duality of money is one of Orrell’s launching pads to analyse money’s social life from diverse and, like gender, traditionally neglected perspectives. Such well-researched social circumspection soon gets you entangled in the powers that be.

Nonetheless, I did not expect the narrative power of human agency to take center stage of quantum analysis and get to the gist of the money story in one leaping swoop: Read money’s duality as real versus virtual and you get the debtor who holds the real money, whilst the creditor gets the virtual slip. Which is why s/he needs a massive big whip. Nomos&Nexus.The rest is history.

“Measuring the result into existence” barely needs transcribing into valuing the “loans” of credit money into existence, not just spectacularly so as in the “ex valorem” creation of credit money “ex nihilo” but more generally by measuring and calculating future value along the lines of CasP’s iconic formula, its power-crunched numbers contingent upon continuous re-evaluation and prone to sudden preference reversals.

Capitalisation Evaluation Formula

Dancing to the narrative complexity of relative positioning, credit&debt have done their routine for literally ever. Beyond whence one may wonder if it was precisely when numbers start counting relative values that the “evil” Mephistophelesian magic of money was unbottled? Commodifying collective abundance into privatised scarcity, unbounded singular appropriation atomises, abstracts and decontextualises the real into its virtual representation which being quantified is ready to outgrow anything real any time, any place. Especially in the narrative human eco-sphere where historically the ancient money-duo’s whirling dance has been in the habit of whipping up accumulating credits into suddenly collapsing piles of exhausted debt.

As Orrell keeps remininding us: Numbers matter, not least because they know no bounds and have bent our deep minds into categorical cognitive conceptualities some researchers have read to suggest that writing&money are not the offspring of reasoning at all. Rather it’s exactly the other way round.

capitalaspower

Time=Money always sounded true enough. Money=Power has been waiting in the wings all along, perhaps, and seems to be coming out lately. To me, anyway. First Capital as Power seems to resolve centuries of re-conceptualising capital composition into the relevant singularity of relative capitalisation. Then I found The Lost Science of Money, Stephen Zarlenga’s neglected masterpiece suggesting in its subtitle why that might be: The Mythology of Money – The Story of Power.

Historical Money Power

All over social science researchers seem to be sifting through the ashes of dusty and discredited dominant narratives like there is a tomorrow beyond humans as repressed beasts run by a self-maximising calculus. A tomorrow of rediscovering human agency beyond the prescriptions of the Western Narrative and The Market’s conscription into atomised consumer preferences.

Based on his survey of revised social research, Rutger Bregman’s “Humankind” was perhaps the first bestseller to sketch this emerging new portrait of “human nature”. In that Orrell is doing his quantum bit to refresh our ideas about human possibility, he is on the same canvas as Graeber&Wengrow’s “Dawn of History” and countless more or less heterodox researchers all over the planet. Orrell’s Magic Money Bomb is a highly recommended read for all connoisseurs of curiosity and hope.

And an absolute must-read for would-be economists.

Want to study economics? First read this book!

Before you invest years of your time and 1000s of your dollars to practice Mankiw, take time to read this book. Don’t pay big bucks before you’ve read this quantum leap of a mind-bender destroying incumbent thought like there is a tomorrow. It’ll reach parts of your brain you could never code into clockwork DSGE. Read this book to reconsider the relevant marginal utilites. Especially if you are a bit of a quant, a bit nerdy or a bit curious.

97% Micro

Which takes me back to the “But…” of my opening remarks. The author of bestselling Economyths is famous enough but he is also a double outsider. No title, no tenure. A non academic and non economist. For the double outsider to not just critique de facto economics but seriously propose no less than an alternative paradigm is like: Who? What? Such impertinent posturing is destined to be inappropriate, infuriating and downright insulting to all sorts of faithful incumbents. Realistically, even the most dazzlingly quantumized message is unlikely to elicit more than the odd ad hominem response from official representatives of The Academy.

I say faithful incumbents because among my local sample of academics I have yet to meet an economist who doesn’t turn out to be rather doubtful, if not downright dismissive of DSGEism. That includes quite a few teaching it every day. Lingering is a dismal lack of conviction in the relevance of “all that micro stuff”, let alone non existing macro. Which just goes to show how thanks to the contradictory potentials of the human narrative one’s positioning does not determine one’s identity more than one lets it.

Austrian Analysis

A professional mainstream economist, for instance, may or may not believe, more or less, in equilibrium economics. So you never know, some DSGE practicing quants bored with dis-aggregating aggregates or curating paedagogical micro-curves may be more than ready to embrace this more complex math-modeling paradigm to regain some scientific credibility? It may take some imagination and effort to embrace quantum as the “4th Synthesis”. But why not? This is not quantum yoga. This conceptual methodolgy comes with a lot of math for quants. Who might prefer to go straight to Orrell’s other more technical books and articles.

So you never know. History typically leaves it to outsiders to refresh the stagnant narratives of conceptual silos. And if David Orrell is in with a chance it is because he is a mathematician. As such he represents what incumbent DSGE economists fear most: Someone who practices more complex math than they do. And predict a crash with it. Like hetero Post-Keynesian Steve Keen.

Math or no math, ortho-economists tend not to engage with hetero economists, let alone non-economists. It was a rare event when, prompted not by Keen’s publications or the 2008 crash but presumably the BoE’s didactic intervention in 2014, eccentrically heroic Paul Krugman generously felt obliged to temporarily argue with Steve Keen about “Savings&Loans”. We know how that ended.

An outlier not to be repeated. Too embarrassing. But note that beyond all his 15 pages of equations, the “Krugman is Wrong – Keen is Right” economist Edmont Kakarot-Handtke agrees with Krugman that the argument is ultimately about “how should one do economics”. Exactly. Even more than most hetero-economists, Kakarot-Handke appears angrily exhausted from the idiotic obstinacy of orthodox irrelevance. But would he be impressed by how Quantum figures profit?

So what are these quantum ideas that I will be proposing? Here is a sample:

David Orrell – 2022 – Magic Money, Magic and How to Dismantle a Financial Bomb
  • Money has the properties of both a virtual number and a real, owned thing
  • Money jumps, instead of moving in a continuous flow
  • People don’t obey classical logic, or even adjusted versions of classical logic of the sort used in behavioural economics
  • The financial system entangles people in a web of debt
  • Economic behaviour is affected by things like subjective feelings and altruism
  • The economy is a dynamical system, i.e. it moves around
  • Transactions are inherently probabilistic, rather than deterministic
  • Money creation out of the void is one of the most important phenomena in economics, but also one of the least understood
  • Eternal growth cannot be supported
  • Ethics are important.
David Orrell – 2022 – Magic Money, Magic and How to Dismantle a Financial Bomb

Incumbent ortho-economists would struggle. You can read Orrell’s list as a menu of slaughtered holy cows hard to swallow if one identifies with the textbook scriptures. Nor are many heteros, including Austrians and Marxists, likely to be overly impressed: “It’s what we have been saying all along. Why formalize the obvious into some chimerical quantum of authority?” Prepare for erudite versions of the ortho snub about MMT : “Original and correct. But when correct it’s not original, and when original it’s not correct.”

If these proposals all seem painfully obvious and pedestrian compared to the stories peddled by mainstream economists, such as the marvellous Invisible Hand … or the equally amazing Efficient Market Hypothesis … then don’t worry – that is the point. As we will see, they are all incompatible with some of the basic tenets of mainstream economics (and for that matter a lot of non-mainstream economics), at least in the absence of epicycles. And together, they point the way to a new economics, which has no need for such ungainly appendages, and which has room for the truly magical and creative properties of money

David Orrell – 2022 – Magic Money, Magic and How to Dismantle a Financial Bomb

The relevance of quantum to the money markets meant Orrell managed to sneak through TheEconomist’s Buttonhole as a “leading proponent” and landscape surveyor of “…a niche area of research known as quantum finance. …Mr Orrell argues that modelling markets with the mathematical toolbox of quantum mechanics could lead to a better understanding of them.” In his circumspect column, Buttonwood seems to agree, not least because “…quantum computers, which replace the usual zeros and ones with superpositions of the two, are nearing commercial viability and promise faster calculations.”… read article below

Like CasP, or Steve Keen, quantum economics will get credit from finance professionals for superior modelling of markets. Thanks to quantum computing, quantum is bound to be branded on to financial advice?

future present (zero) quantum marketing

The relevance of quantum to social science goes beyond its deconstructions of economic orthodoxy and a-historically atomistic rationality, just like homo economicus has escaped from The Academy and infiltrated real life with decontextualised efficiency calculations and counterproductive target driven efficiency metrics.

As to the epistemological status of the relevant ontology, or vice versa, there are delightful debates to be had across the duality of metaphor or model. Orrell makes a point of declaring the quantum model not just a metaphor. But then he’d better in a context where chimeras of quantitative authority are all the rage and there is near zero awareness of how operational definitions inscribe themselves from virtual into real without a second thought. Like with IQ or GdP, intelligence or progress become what is being measured. Mountains of manufactured data obscure the original intent, interest, voice or power.

Quantum looks as if it does not let you hide behind big data, claiming you can measure without a theory. Quantum reads like self-reflexivity operationalised, ie social rather than natural science. Especially when the narrative comes numbered. For superior quantitative social analysis and a future science of monetarisation, a leap into quantum looks like one of the best bets yet.

Just follow the money…


David Orrell

futureofeverything-D.Orell-blog 12-2021 Quantum economics – the story so far – This piece gives a brief summary of my work to date in quantum economics

“The idea that the financial system could best be represented as a quantum system came to me (dawned on me? evolved?) while working on The Evolution of Money (Columbia University Press, 2016). “Money objects bind the virtual to the real, and abstract number to the fuzzy idea of value, in a way similar to the particle/wave duality in quantum physics,” I offered. “Money serves as a means to quantify value, in the sense of reducing it to a mathematical quantity – but as in quantum measurement, the process is approximate.” Price is best seen as an emergent feature of the financial system. I summarised this theory in two papers for the journal Economic Thought: “A Quantum Theory of Money and Value” and “A Quantum Theory of Money and Value, Part 2: The Uncertainty Principle“. While I had some background in quantum physics …”… read article at source

futureofeverything-D.Orell-blog 11-2021 Ten reasons to (not) be quantum

“While the use of quantum models is becoming more popular in the social sciences including economics, it is still the case that when many people, especially those with a training in physics, hear the expressions “quantum economics” or “quantum finance” they immediately reach for some off-the-shelf arguments about why it must be nonsense (or some smelling salts). Here is a compilation of the usual ones, along with responses.

Quantum mechanics was developed for subatomic particles, so it should not be applied to human systems. As one website claimed, “It’s only when you look at the tiniest quantum particles – atoms, electrons, photons and the like – that you see intriguing things like superposition and entanglement.

Response: Bohr’s idea of superposition and complementarity was borrowed from psychology, as when we hold conflicting ideas in our heads at the same time, and the concepts of mental interference or entanglement are not so obscure. Also, many ideas from quantum mechanics such as the Hilbert space were invented independently by mathematicians. And calculus was developed for tracking the motion of celestial bodies but we don’t ban its application to other things. …”… read article at source

GM David Orrell page

David Orrell

articles, presentations, reviews

futureofeverything. 2022 David Orrell update: “My work in economics has seen me called a number of things including a conspiracy theorist, and the intellectual equivalent of a climate-change denier. More recently an academic physicist read this piece and wrote, in a now-deleted tweet, that I was a charlatan who was ducking and weaving in order to avoid any criticism. I replied that he may have read the post, but he hadn’t understood it. He said “I judge you are not a crank. I judge you are a charlatan.” Then he thought about it (references to names redacted):

Any physicist worth their salt should agree with him that the only test is whether quantum math proves useful in modelling and prediction.”

Read whole argument on use of quantum in social sciences in twitter


economist.com 11-2021 Buttonwood – A quantum walk down Wall Street – Lessons for finance from 20th-century physics

…on a closer look finance bears a striking resemblance to the quantum world. A beam of light might seem continuous, but is in fact a stream of discrete packets of energy called photons. Cash flows come in similarly distinct chunks. Like the position of a particle, the true price of an asset is unknowable without making a measurement—a transaction—that in turn changes it. In both fields uncertainty, or risk, is best understood not as a peripheral source of error, but as the fundamental feature of the system.

Such similarities have spawned a niche area of research known as quantum finance. In a forthcoming book, “Money, Magic, and How to Dismantle a Financial Bomb”, David Orrell, one of its leading proponents, surveys the landscape. Mr Orrell argues that modelling markets with the mathematical toolbox of quantum mechanics could lead to a better understanding of them.

Classical financial models are rooted in the mathematical idea of the random walk. They start by dividing time into a series of steps, then imagine that at each step the value of a risky asset like a stock can go up or down by a small amount. Each jump is assigned a probability. After many steps, the probability distribution for the asset’s price looks like a bell curve centred on a point determined by the cumulative relative probabilities of the moves up and the moves down.

A quantum walk works differently. Rather than going up or down at each step, the asset’s price evolves as a “superposition” of the two possibilities, never nailed down unless measured in a transaction. At each step, the various possible paths interfere like waves, sometimes amplifying each other and sometimes cancelling out. This interference creates a very different probability distribution for the asset’s final price to that generated by the classical model. The bell curve is replaced by a series of peaks and troughs.

Broadly speaking, the classical random walk is a better description of how asset prices move. But the quantum walk better explains how investors think about their movements when buying call options, which confer the right to buy an asset at a given “strike” price on a future date. A call option is generally much cheaper than its underlying asset, but gives a big pay-off if the asset’s price jumps. The scenarios foremost in the buyer’s mind are not a gentle drift in the price but a large move up (from which they want to benefit) or a big drop (to which they want to limit their exposure).

The potential return is particularly juicy for options with strikes much higher than the prevailing price. Yet investors are much more likely to buy those with strikes close to the asset’s market price. The prices of such options closely match those predicted by an algorithm based on the classical random walk (in part because that is the model most traders accept). But a quantum walk, by assigning such options a higher value than the classical model, explains buyers’ preference for them.

Such ideas may still sound abstract. But they will soon be physically embodied on trading floors, whether the theory is adopted or not. Quantum computers, which replace the usual zeros and ones with superpositions of the two, are nearing commercial viability and promise faster calculations. Any bank wishing to retain its edge will need to embrace them. Their hardware, meanwhile, makes running quantum-walk models easier than classical ones. One way or another, finance will catch up.


toptraderunplugged 26-1-2022 Volatility Series: The Magical Properties of Money – David Orrell

Hari Krishnan is joined today by David Orrell, to discuss the problems with using physics analogies on financial markets, the cause and effects of price impacts, David’s new book: ‘Money, Magic, and How to Dismantle a Financial Bomb’, the magical properties of money, how sentiment drives price although it is so unpredictable in nature, the similarities between weather forecasting and economics, the sustainability of money creation by central banks, and some thoughts on cognitive interference.


goodreads.com/review Darya 2-2022 If I were to pick up my top quote from this book, it would be “Money is a powerful social technology”.


irishtechnews.com 10-2-2022 David Orrell – MONEY, MAGIC AND HOW TO DISMANTLE A FINANCIAL BOMB – BOOK REVIEW by SIMON COCKING – We look at this provocative book by David Orrell, which aims to cross quantum concepts with finance and money matters.


mindmatters.com 17-2-2022 WHAT IF QUANTUM PHYSICS WERE APPLIED TO ECONOMICS? – A mathematician argues that ideas that seemed bizarre in classical physics makes perfect sense in economics