Both alive and dead: the economic cycle and quantum superposition

Feb 14, 2023

Redacción Mapfre

Redacción Mapfre

The current economic cycle and quantum superposition are two very different concepts, but they have uncertainty and unpredictability in common. The economic cycle refers to the natural fluctuations of economic expansion and contraction, while quantum superposition refers to the concept of quantum mechanics in which a particle can exist in multiple states at the same time.

The current economic cycle is the result of diverse factors, such as changes in consumption, governmental policies, technological advances and unanticipated global events, such as a geopolitical crisis or any type of black swan. The cycle often follows a pattern in which the economy grows during the expansion phase, reaches a peak, and slows down during the contraction phase, and bottoms out during the depression phase, catalyzing the dynamics or mechanism of expectations.

Duration, intensity and the timing of each phase are evidently not certain phases, and are subject to speculation and, often, to untrained assertion. We live in times of untrained economic assertions, where all of them can coexist. On one hand, we have clear indications of imminent contraction with monetary policy in restrictive terrain, with corrections in the income and wealth of different agents, with valuations flirting with irrational exuberance (Shiller, 2000) and corrections and changes in credit stress are anticipated. But, at the same time, we are sure the unprecedented employment and unemployment rates for the US, coupled with signs (which I understand are anecdotal) of high frequency and wage growth, as well as changes in the tone of monetary policy, with some recession in core inflation, will lead us to that desired paradise of a soft landing and thinking all is well. There is no significant crisis in sight. Or maybe there is. Or maybe both.

Quantum superposition is also characterized by uncertainty and unpredictability. In quantum mechanics, a particle can exist in multiple states simultaneously until it is observed, at which point it collapses into a single state. This phenomenon challenges our classic understanding of reality, since particles can exist in different places and states at the same time. This means the exact result of an experiment can only be predicted through probabilities, which makes it difficult to determine the exact state of a particle before it is observed, which makes it possible to have multiple expressions of a “ex ante” state. That is, before the probability collapses into a single state (the famous Schrödinger's cat, both dead and alive).

In both the current economic cycle and in quantum superposition, there is a level of unpredictability and uncertainty. But beyond that, it seems these days that both disciplines accept that you can be, and not be, in recession and expansion. Or alive and dead at the same time.



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