Risk Management
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Heisenberg’s Uncertainty Principle and Unintended Consequences in Finance

TMI Academy


by Eben Maré, Associate Professor, University of Pretoria

Central banks have their jobs cut out for them! They measure a set of economic variables (such as inflation and employment), on a historical basis, and use those results combined with monetary policy to influence the future behaviour of the economy.

Without trying to complicate matters, we are reminded of the Heisenberg uncertainty principle in quantum mechanics which states, in layman’s terms, that we are unable to measure physical properties (for example, velocity and momentum) of a particle without affecting the particle.