Quantum conception of economic change
By: Reza Madjidzadeh
Abstract:
There are two different approaches to the proposition of time in meta-theoretical sphere of social science: one falls within the framework of Newtonian paradigm and the other within the Quantum paradigm. Expanding the meta-theoretical system of quantum paradigm, this paper attempts to offer an appropriate system with the objective of providing an analytical framework toward conception economic change using the “Nested Games” theory.
JEL codes: B41; B52
Keywords: Quantum paradigm, Nested games, economic change and Quantum nested games.
Introduction
There are two different approaches to the proposition of time in meta-theoretical sphere of social science. This paper attempts to offer an appropriate system to the proposition of time which be consistent with quantum approach. Changing economic analysis metric toward quantum conception is the core problem orientation of this paper. Static foundations of mainstream economics prevent tracing economic dynamics. It’s not possible to explain both static and dynamic features in unit partial theory. Each theory creates its own discourse space in which we can interpret the world around us, position of phenomena and change the settings toward our beliefs. Guidelines of theorizing North (2005) suggests a system based on triple grand theory. The system consists of a theory on institutional framework, a theory on demographic change, i.e. quantity and quality of human being and a theory on the stock of human knowledge. Yet, there is no bridge to link these three partial theories together. In this article it is suggested that incorporating North’s point of view and Tsebelis’s nested games theory can help us to set up an appropriate analytical framework to account for dynamics of socio-economic systems.
Next section is devoted to take a review on the proposition of time in social science. There are two main approaches dealing with the subject: Newtonian and Quantum. Second section explains implications of second approach on understanding economic world. Whether you take a static stance or dynamic stance, conception will be affected. Conception of economic world is depending on your perception of world. Third section rearranges economic world according with quantum concepts. Good deal with this problem, however, is very hard. In section four I’ll contrast North’s method with Tsebelis’s nested games theory. Then, in section five incorporating two theoretical systems lead us to suggest appropriate system toward quantum conception of economic world. Quantum conception isn’t my aim. That’s a point of view making economics more efficient. Quantum methodology can grow explanatory value of new theories based on that.
Time in social science
There has been a main stream approach to proposition of time in social science, affecting ontological, methodological and epistemological aspects of theorizing. Cartesian foundations of the approach led social scientists to ignore the time in conceptualization of social world. The central idea of such an approach is the unification essence of phenomena. Hence a phenomenon in every time (and space) will be same. More ever, whether is the kind of phenomenon, social scientist’s mathematical formulation of phenomena identifies them in terms of numbers and quantities and we can deduct any statement based on numbered identities. If we treat social order as a timeless phenomenon, in the way time can be measured without need to account for processes, then abstraction of social realities from time attitudes won’t deny our statements explanatory value. Moreover we would have a universal theory.
Mainstream economics and sociology are subject to principles of Newtonian paradigm, Euclidean point of view and Cartesian epistemology. Euclidean-Cartesian point of view draws socio-economic world by microscopic identities. In this manner, conception of socio-economic reality relies on a linear space imagination-without any gravity and friction. So, we have to focus on behavior rather than action and praxis. We treat people as material. We abstract socio-economic reality from time and space dimensions. We decompose that into separated components. Hence the whole socio-economic system would realize as the simple summation of the numbers (individuals). There is an explicit assumption in mainstream economics which have important implications on knowledge transfer and universalization of theories: Acceleration of different coordinate systems is equal. According to the assumption in all of socio-economic systems any process of feedback and adaptation take place in same duration. So any casual relation observed in A would be truth in B. In other word reactions to any event are same in all of the systems.
Therefore change is simply defined as transfer from one point to another. The process of change and transfer of knowledge is subject to Lorentz transformation. Here we can treat information in social science as light in physics. According to Piotrowski and Sladkowski, “although the effective market hypothesis assumes immediate price reaction to new information concerning the market, the information flow rate is limited by physical laws such us the constancy of the speed of light” (Piotrowski and Sladkowski 2004: 4). Hence we can’t assume similar adaptation rate for different socio-economic systems. Hodgson (2001) points out this problem as “historical specificity in social science”. When the speed of information flow and reactions (consciousness, cognition, mental models, decision and choice) stays constant in any coordinate system, we can ignore the effects of praxis and institutions as social constraints to behavior. Then, there is need to replace behavior by action. In other word, we must set a system to account for social gravities along with human choices.
There have been alternative points of view emphasizing historical evolution and economic dynamics on the base of non-Euclidean-Cartesian worldview. Meta-theoretical foundations of some alternative views are consistent with quantum physics epistemological implications and Darwinian organic ontology. Having focused on dynamic nature of social reality, these point alternatives prohibited abstracting time from socio-economic phenomena. In one hand an organic being is related to its past, and in other, time is not dependent from matter (organism or non-organism) and movements of matter define time. Knowing specificities and properties of phenomena requires tracking continual changes in interacting organs. So history matters in a sense of path dependency (Hodgson, 2001: 3).
Therefore change is occurred by continual sequences. A sequence is consisting of five factors: event, information flow, mental process, decision, and action (social or individual). Yet, we don’t have a coherent analytical system to explain change in this manner. Action aims toward change, so there is now reason to impose static models on that. Action is a dynamic process.
During two centuries, Marxists, historians and institutional economists have been investigated for such a coherent system. Importance of history and social and political aspects of socio-economic system are their most fundamental achievements toward establishing new paradigm. However conception of soio-economic world into new language to capture dynamic aspects of four dimension space requires regression to paradigm level issues. Very failures or incompleteness of current analytical systems lead us to revise our meta-theoretical models. Quantum physics meta-theoretical implications have a great potential to expand such a system. Next section is devoted to illustrate quantum physics meta-theoretical implications, toward “quantum paradigm”.
Quantum Paradigm
Paradigm is the common sphere of established epistemology, ontology and methodology. Different theoretical disciplines share their explanation rules in paradigm discourse space. In other word, meta-level of reduction take theoretical terms into paradigm sphere. We identify events and phenomena in terms of reduced conception channels. Our worldview directs our identification methods. Any reorientation in channeling conception directions affects both discourse space of theorizing and meta-theoretical sphere of shared principles. Social sciences have been affected by revolutions in physics and biology. Both classical physics and Darwinian evolutionary biology have inspired social scientists in explaining socio-economic world. Concepts such as equilibrium, evolution and natural order are samples of the affection. Now we can reorient social science by focus on conception channels and methodological foundation of quantum physics and relativity theory.
Non-Euclidean geometry, Minkowsky space, relativity theory and inconstant speed of light are contents of quantum paradigm. Non-Euclidean geometry defines a curved space in which Euclidean rules don’t matter. Einstein illustrated that as replacing analytical geometry by experimental geometry. The key of difference is Gravitation. Gravitation affects space-time position of mass. Deviations from expected directions or results in large scale are explained by gravity. We can translate gravity into socio-economic language as praxis, and structure of social action. Such translation is incomplete without introducing a concept showing gravitation fields which are origins of deviation from pure rational behavior. Gravitation among social phenomena would prevent us to abstract human action from its space-time specificities. So we live in world of events. Space and time transform to event in the light of relativity (Russell, 1925: 199-230). Social reality is the combination of phenomena such as social interaction and technological matters related to human factor. Then ontological aspects of that must be treated in a dynamic manner (Lawson, 2003: 16).
Accepting this ontological stance, epistemological relativism will be recognized as consistent with dynamic ontological view. Therefore knowledge is accessible provided that historical and context-based descriptions of social reality. Context contains observer. In 18th and 19th century, Historical evolution was introduced. The meta-theoretical foundations of this view are consistent with Darwinism and Quantum revolution. Yet, these revolutions didn’t adequately affect social science. Although there is some theoretical school in the subject, meta-theoretical implications of the two events have not been completely accounted for.
Evolutionary point of view don’t allow to abstract time dimension from phenomenon. Because of interrelations between components of a collection, understanding its properties requires tracking continual transformations of the collection and its components. Every organism is subject to its past. Evolution is based on heritages of past. Therefore historical specificity of phenomenon matters (Hodgson, 2001: 3). Hence change and time closely are related together, so we can’t explain dynamics by imposing static tools on observations and showing simple changes in Cartesian coordination independent from the process.
There are some schools of thought taking into account these points of view. Nevertheless no coherent analytical system has been suggested. Coherency of analytical system refers to not also hierarchical ontological consistency but also internal correspondence between dynamic tools and tracking process of becoming of the subject- this is motion produces time and time is not dependent from body movements. During last two centuries, Karl Marx, German Historians, Joseph Schumpeter and Institutional Economists have tried to provide such a system. Emphasizing on importance of historical specificity and path-dependency are main achievements of their attempts.
Nevertheless, these achievements must be completed by regarding meta-theoretical implications of other scientific disciplines. Quantum revolution in physics has a great potential of reorienting economic dynamics analysis on the basis of which. I called such a new system Quantunomics, reorienting economic dynamics theorizing by attaching paradigm implications of quantum physics to that.
Toward new system
Discarding any ambiguous tale and myth, I will focus on Lorentz transformation, inconstant speed of light, space-time, different acceleration of coordination systems, and non-Euclidean geometry. Expanding their implications for economics into meta-theoretical language, point of view of some social scientists will be attached to them. Then, a primarily system will be introduced.
Before juxtaposition of above elements, introducing core assumption of the system is necessary. Special relativity is based on constant speed of light. If P is a point in empty space and P′ is another point near P- distance between them is equal to ε- and a light ray propagates from P in time t and get to P in time t+dt then we have:
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Where x1, x2 and x3 are space coordination of ε, c is speed of light and x4 is time coordinate. This formulation shows Euclidean metric. The equation introducing this metrics is applied to differentials of coordination. In special relativity, the only permitted change in coordination is in the way that ε2 in new coordination system will be equal to summation of coordination’s differentials. This is so called Lorentz transformation implies that universality of observed and alleged causalities is true under condition of constant speed of light and equal acceleration of coordination system. In other word causality is necessary but uncertain. We can translate this theorem into economics by the analytical rules of institutional economics. Since the process of adaptation of socio-economic systems depends on the speed of propagation of information in the systems and reaction to that, we witness different performance in long run. That is gravity fields in economic space makes information deviated. This is why North (1990) explains economic world by friction, transaction costs.
If we accept balance among all coordination systems, then, by assuming constant speed of light and Euclidean metrics, general relativity will be validate, so we have:
EMBED PBrush Where g, μ and ν are functions of x1 … x4. That’s the difference between these spaces with Euclidean space. Here, distribution and composition of bodies determine the gravity field, so space forms subject to physical factors and we witness a deviation from expected Newton-Galilean relativity principle.
To summarize my thesis in economic words, information in economy have a function same as light in physics. Photons are related to energy. Einstein formulation of energy contains speed of light as a determinant factor. In economic world information propagates and makes us to have a reaction. Our actions plan to change our condition. Our planning is done by information. Information propagates in physical world and is processed in our mind. So information passes through gravity fields and lock in frictions. In other world, Lorentz transformation rule matters whether in propagation of information and adaptation.
It follows that, transformation of socio-economic systems is subject to the way information propagated and gravity fields of socio-economic organism. Hence, this is necessary to set up a system encompassing both of microscopic identities and macroscopic identities interacting with each other. Institution as a transhistorical concept, containing historical specificity, allows taking the interaction into account. Yet tracking interaction process requires an analytical system. If we set social exchange as analytical starting point, then we can account for all non-Euclidean properties of socio-economic space in the face of game theory.
Since mid of 1990s, game theory have attracted some institutional economists. Avner Grief (1997) called that “game theoretical revolution in historical and comparative institutional analysis”. Institutions are the rule of games and games result in new institutions. G, M. Hodgson (2002) in examining agenda of evolution of institutions suggests taking initial institutions for granted. Language is the initial condition institution and social interaction is based on. Establishing game theoretical analysis by treating language as the initial condition will help us avoiding infinite regress. Game theory is a suitable metric to capture above features. Although lack of a consensus on the problem of agency and structure, game theoretical analysis have features taking into account the theorists of agency and structure problem. Partly, tracking structuration, emerging properties and other comments on the problem are answered by game theoretical analysis.
Now, what is new in this article? I reshow institutional framework by quantum concepts, is that enough? Till now, I have extrapolated guidelines to establish new system. Although it seems that quantum concepts reviewed here have no contributions to improve our knowledge about economic change, incorporating some correspondent approaches covering above guidelines will take us near our expected system.
To summarize, establishing quantum based analytical system will be based on institutional theory, game theory and a meta-theory to incorporate them.
Quantunomics
Epistemological relativism is the main meta-theoretical implication of quantum revolution. Building an analytical framework upon that requires an approach not also taking account for agents’ interactions but tracking the process of the interaction and emerging properties. In other word, we need both transhistorical concepts and interaction based approach.
J, S. Coleman (1990) suggested minimal systems analysis to solve aggregation and decomposition problem in social science. Coleman’s analytical system is based on minimal systems, i.e. decomposing macrosocial propositions into three microsocial proposition. Figure (1) shows Coleman’s suggested system.
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A proposition provided for the relation between A and B is a macrosocial proposition. AC shows shifts from structure to agents’ sphere. CD is the realm of interactions among agents and DB is the direction of aggregation to macro sphere. This figure is the scheme of socio-economic formation. In position A, information trickle down to agents and they organize their actions according to processed information. The social exchanges begin and equilibrium of the exchanges - game to catch scarce resource and exchanging them-take the socio-economic system to B (Coleman, 1990: 15-34).
What we call change is a motion from AB to other structure, e.g. A´B´. The motion creates time. From A to B is being and from AB to A´B´ is becoming. The time for AB is different from time to ABA´B´, i.e. changing scale of analysis take us to different time coordination. Therefore, examining individual agents’ behavior has different time features from the whole structure. Since different adaptation speeds make variety of accelerations, examining structure is subject to equation (2) and examining individual agent’s behavior is subject to equation (1). Here examining socio-economic exchange is subjects to equation (2), so there is correspondent between structure-based analysis and explanation relying upon game theory. Tracking motions enables us to explain economic change; however, we must explore the figure by more details.
Economic historians must explain structure influence on economic performance and dynamics of the structure (North, 1981:3-7). According to North (1990), agents organize their actions subject to the incentives of institutional structure. To our scheme, in position A, information about the nature of position propagate among agents. Information contains codes of economic resource and trends of them. These codes produce incentives to motivate agents, so they act to improve themselves to better position. The movement needs arriving in socio-economic exchange. Now agents begin to invest in socio-economic transaction. Investment mean planning strategies toward acquire more resource or better bargaining power. Here we witness a patterned mass of events and games. North (2005) puts out that:” it is result of change (1) in the quantity and quality of human beings; (2) in the stock of human knowledge particularly as applied to the human command over nature; and (3) in the institutional framework that defines the deliberate incentive structure of a society”(North, 2005:1). Now, the patterned mass is clearer. So, how can we incorporate these three fields into an analytical framework? How can we do the puzzle with these parts?
Understanding the status of reality and its change, the relationship between beliefs and economic performance and the nature of process are the fundamental questions (ibid: 4). Though, North describe the fundamental problems and theories necessary to understand economic change, he didn’t provide a clear way to applying his suggested system in terms of a unified theoretical system. We are faced with the concept of non-ergodic world by which North means that averages calculated from the past observations can be persistently different from the time average of future outcomes (ibid, 19).
Since probability matters by this definition and possible deviations from expected path are taken for granted, the concept of non-ergodic world is consistent with quantum view. Looking for a theoretical framework North (2005: 12) suggests that; time dimension is incorporated as an integral part of analysis. We can do that by attaching north triple-theories to Coleman’s system. Yet, we don’t have a detailed plan to tracking change and we have locked in ambiguous concepts. Along North’s works many fruitful concepts have been provided to understand dynamics of socio-economic systems. However, we need an order to set them in right places.
In North’s conceptual program human interaction and human environment play a critical role. Hence every order must be based on human interaction. In other word, the stock of knowledge, tension between population and resources and institutions are related to human interactions and human environment.
After propagating, knowledge is developed. Propagating is an interaction-based factor. Institutions are the rules of the game. People involved in games and compete with each other. Scarcity of resource in macrosocial view means that tension for acquiring them will be between human and nature, however, the tension will be between human and human to.
It follows that; game theory is the suitable system to handle the problem. However, game theoretical analysis must capture not only triple-theories of North but also takes “artificially separated frameworks” into account. Recently game theoretical revolution has been affected institutional historical analysis. Scarcity of resource in macrosocial view means that tension for acquiring them will be between human and nature, however, the tension will be between human and human to. It follows that; game theory is the suitable system to handle the problem. However, game theoretical analysis must capture not only triple-theories of North but also takes “artificially separated frameworks”3 into account.
Recently game theoretical revolution has been affected institutional historical analysis. Aoki (2001), Grief (1997) and Tsebelis (1990) are some theorists applying game theory to institutional analysis. Though Grief and Aoki are known for institutional economists, Tsebelis is not very famous. In 1990 He introduced “nested games theory” to analysis of institutions in political world. He introduced a game theoretical system for analyzing institutional change and seemingly irrational choices. Moreover, Tsebelis’s system has great potential to interdisciplinary explanations and incorporating three separated disciplines. Tsebelis (1990: 5) notes that: