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From Jesús Fernández-Villaverde and Isaiah J. Hull a new paper:

NBER 31326: We introduce a novel approach to solving dynamic programming problems, such as those in many economic models, on a quantum annealer, a specialized device that performs combinatorial optimization. Quantum annealers attempt to solve an NP-hard problem by starting in a quantum superposition of all states and generating candidate global solutions in milliseconds, irrespective of problem size. Using existing quantum hardware, we achieve an order-of-magnitude speed-up in solving the real business cycle model over benchmarks in the literature. We also provide a detailed introduction to quantum annealing and discuss its potential use for more challenging economic problems.

Wikipedia offers more on quantum annealing:

Quantum annealing starts from a quantum-mechanical superposition of all possible states (candidate states) with equal weights. Then the system evolves following the time-dependent Schrödinger equation, a natural quantum-mechanical evolution of physical systems. The amplitudes of all candidate states keep changing, realizing a quantum parallelism, according to the time-dependent strength of the transverse field, which causes quantum tunneling between states or essentially tunneling through peaks. If the rate of change of the transverse field is slow enough, the system stays close to the ground state of the instantaneous Hamiltonian (also see adiabatic quantum computation).^{[6]} If the rate of change of the transverse field is accelerated, the system may leave the ground state temporarily but produce a higher likelihood of concluding in the ground state of the final problem Hamiltonian, i.e., diabatic quantum computation.^{[7]}^{[8]} The transverse field is finally switched off, and the system is expected to have reached the ground state of the classical Ising model that corresponds to the solution to the original optimization problem.

I would not have expected to see a paper like this for many years to come, even decades. I gather that solving the RBC model more quickly is a test case. I can see applications in knapsack problems and auction allocations.

The post Using a Quantum Annealer to Solve a Real Business Cycle Model appeared first on Marginal REVOLUTION.

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