Quantum macroeconomics revisited: A reply

Alvaro Cencini has commented on my recent post here on quantum macroeconomics. His comments are rather extensive, which seems good. In this post, I will try to reply to his main points.

He starts by indirectly suggesting that the discussion of whether money is marginal (or irrelevant) is rather unimportant. I find this surprising, since the “quantum macroeconomics” manifesto starts by asserting that mainstream macroeconomists consider money as marginal and/ or irrelevant. I think that it was well argued why this is not true, and it was actually never true, except maybe for the early New Keynesian models. I rather find that he did not properly comment on this point.

A second point Alvaro Cecini makes is that production is an “instantaneous event”. Sadly, he skipped the literature suggestions I made. I am talking about Kydland and Prescott (1982) paper in Econometrica that lies at the foundation of modern macroeconomics. What they simply did was to recognize that production is not instantaneous and integrate this idea into an otherwise standard dynamic equilibrium framework. However, ironically, in most macroeconomic models, the output is conceived at just being produced in one period (from a certain point of view, instantaneous, although this one period may be one month, one quarter or one year). In a certain sense, there is no novelty for the quantum macroeconomics with respect to this very particular idea, if I am reading it correctly.

And there is a third important point made in Cecini’s comments, namely that money are
“issued by banks as a numerical form expressive of any production output”. First of all, most of the economists do not think that banks create money “out of thin air”. There are however economists who hold this view, see here, and there are others who expressed opinions at a certain time that might support this assertion, see here. Second, not believing that banks create money “out of thin air” does not equate believing that money are backed up by production. Maybe in the books and papers produced by quantum macroeconomists there are more evidences to support this proposition. For the time being, I am not convinced at all. And there is an irony again here, since we rather find some prominent mainstream economists believing that banks cannot create money.

In the end, I must admit that I did not read anything about quantum macroeconomics except their manifesto. Certainly, I might miss some of the subtleties, but I rather find useful the debates about fundamental macroeconomic ideas. Alvaro Cecini also complained that I did not comment at all about the quantum macroeconomics approach to issues like Euro Area crisis, but I may do this in the near future.

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