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E-Book Review: Heisenberg Uncertainty Principle and Economic Analogues of Basic Physical Quantities

We have already published reviews of rather complex e-books concerning Forex trading before (see this mathematical scientific paper for example). The article introduced below is originating in physics or, more precisely, in econophysics.

Soloviev V. from Cherkasy National University and Saptsin V. from Kremenchug National University are trying to carry the philosophy of general relativity and non-relativistic quantum mechanics to the analysis of economy. The presented e-book is called Heisenberg Uncertainty Principle and Economic Analogues of Basic Physical Quantities. It is rather short (21 pages) and about a half of it is filled with the figures depicting the experimental results.

First, they introduce some of the basic physical notions and explain the philosophy behind them. Then, they discuss how these notions and concepts can be transferred to the field of economics. They draw analogies from the concept of mass, speed, energy, and the Planck constant. In the experimental part, they analyze three different groups, each of them consisting of three time series: gold, silver, and oil for commodities; USD/JPY, GBP/USD, and USD/CHF for currencies; S&P500, FTSE100, and BVSP for stocks. Daily values of the period from April 27, 1993, to March 31, 2010, are used. The authors calculate the "economic mass" of the time series, "economic temperature", and "economic Planck constant". Interestingly, their economic mass seems to be higher for the less volatile time series and lower for the more volatile ones. Their temperature parameter rises high during crises and stays low during normal times.

There are three main disadvantages to this article:

  • The analogies drawn are quite far-fetched, while the experimental results do not add much clarity to the time series' analysis.
  • It is written in a rather bad English, which makes an already difficult material even harder to comprehend.
  • While Forex traders with some background in physics will probably enjoy it, others will have to learn a lot of new terms. You will probably need to reread some parts several times and also refer to Wikipedia frequently.

You can download this e-book for free:

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