Quantum Propensity in Economics.

David Orrell,Monireh Houshmand

doi:10.3389/frai.2021.772294

David Orrell, Monireh Houshmand

Open Access

https://doi.org/10.3389/frai.2021.772294

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Abstract

This paper describes an approach to economics that is inspired by quantum computing, and is motivated by the need to develop a consistent quantum mathematical framework for economics. The traditional neoclassical approach assumes that rational utility-optimisers drive market prices to a stable equilibrium, subject to external perturbations or market failures. While this approach has been highly influential, it has come under increasing criticism following the financial crisis of 2007/8. The quantum approach, in contrast, is inherently probabilistic and dynamic. Decision-makers are described, not by a utility function, but by a propensity function which specifies the probability of transacting. We show how a number of cognitive phenomena such as preference reversal and the disjunction effect can be modelled by using a simple quantum circuit to generate an appropriate propensity function. Conversely, a general propensity function can be quantized, via an entropic force, to incorporate effects such as interference and entanglement that characterise human decision-making. Applications to some common problems and topics in economics and finance, including the use of quantum artificial intelligence, are discussed.

Highlights

Theories of economics always rely on theories of value
Neoclassical economists later substituted labour with the energy-like concept of utility (Jevons, 1957). In their Theory of Games and Economic Behaviour (1944), Von Neumann and Morgenstern (1944) developed a consistent set of axioms to describe rational economic behaviour, and the assumption that people act rationally to optimise their own expected utility became the basis for economics as it developed in the post-war era
While this model of rational economic behaviour remains the default approach in economics, cognitive psychologists have shown that its assumptions are often violated

Summary

INTRODUCTION

Theories of economics always rely on theories of value. In classical economics, it was assumed that value is the product of labour (Smith, 1776). Though, a range of cognitive and financial phenomena continue to elude behavioural approaches, because they do not conform to classical logic (Wendt, 2015) This has motivated interest in adopting a mathematical framework based on quantum probability. Well-known examples from the quantum cognition literature include the order effect, where responses to questions in a survey depend on the order in which they are asked; the disjunction effect, where extra information seems to interfere with decision-making in a manner that eludes classical logic; preference reversal, where a decision changes depending on context; or games such as the prisoner’s dilemma, where experiments show that people behave not as individual utility-optimisers, but as people who are entangled through things like a social contract.

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CONCLUSION