In need of 'complexity economics' - CSH

In need of ‘complexity economics’


Apr 3, 2019

Complexity scientists call for faster change in economic concepts

 

A group of complexity scientists, including CSH’s External Faculty Brian Arthur and Doyne Farmer, call for a faster transformation in economic thinking: “We believe that in order for economics to progress it needs to fully embrace a transdisciplinary approach and modernize a number of its key concepts,” they write in a large piece published in the American quarterly Boston Review. The arguments were further discussed by The Economist this week.

 

What is usually called “the economy”, the authors write, is rather “a highly complex, multi-level system that encompasses human biology, human behavior, group behavior, institutions, technologies, and culture, all mutually entangled in networks of nonlinear, dynamic feedback. Each of these levels in the system is subject to learning, adaptation, evolutionary, and co-evolutionary processes which means that the system is constantly changing, self-creating, and never at rest. These dynamics in turn create system-level emergent behaviors, including economic growth, inequality, and financial booms and busts. The whole system, in turn, is deeply embedded in the physical processes of our planet.”

 

In short, “the” economy is a—and is part of a—complex system.

 

Mainstream economics falls short in dealing with real-world complexity

 

In order to better deal with this complex system, the transdisciplinary approach of complexity economy—which is also one of the core competitions at the Complexity Science Hub Vienna—breaks with traditional perspectives.

 

In their article, the authors elaborate three examples of the new way of thinking:

 

First, complexity economics don’t follow the notion of rational choices: The Homo sapiens “looks almost nothing like Homo economicus. Instead of asocial, transactional, self-regarding utility maximizers, real humans are intensely social, highly cooperative, and other-regarding creatures who make decisions inductively, heuristically, mimetically, and through group reasoning.”

 

Second, traditional economics with its concept of “the representative household/the representative firm” entirely misses heterogeneity. Although a new generation of economists tries to deal with that problem, most of their work is looking backwards, the authors criticize: asking “What happened?” instead of “Why did it happen” or, even more importantly, “what do we do?” In contrast, they point out, “explicitly modelling heterogeneity is central to the complexity economics agenda.”

 

“With the standard economic view of climate change, we may optimize our way to mass extinction”

 

The third important difference is the systems level view of the economy: “Economics has historically assumed that the economy is an equilibrium system—a system at rest. (…) But in the twenty-first century we can do better,” write Brian, Doyne et al.

 

A disturbing example is the current climate crisis. “The standard economic view is to see climate change and our response to it as a cost-benefit problem to be solved using optimization models that ‘internalize the externality’ through carbon prices,” states the article. According to one physicist, this view might even optimize our way to mass extinction. Complexity economics on the other hand sees “the economy as a complex system embedded within the larger complex system of the environment.”

 

The authors call the current ecological and climate crisis “the mother-of-all disequilibrium problems” and describe the necessary shift to a zero-carbon economy as “an epochal system transformation on par with the shift from hunting and gathering to agriculture or the Industrial Revolution. (…) It is a problem that requires extremely rapid responses that go far beyond what the standard optimization models even consider, including major changes in our technologies, institutions, behaviors, and cultures,” a problem so big that “it will require economists to work closely with other disciplines and be open to radically different ways of thinking.”

 

To tackle the challenges, changes in the field should “go further, faster. Economics needs to embrace what other fields have learned about behavior, networks, institutions, culture, evolution, and non-equilibrium systems. To date the infrastructure of the economics profession—journals, funding bodies, hiring and tenure committees—has been largely closed to these ideas and approaches. If economics is to reform and move beyond neoliberalism, this needs to change.”

 

“Economics after Neoliberalism”

 

The article by Brian Arthur, Doyne Farmer et al. is the contribution to a discussion that was started in February 2019 by three economists in the Boston Review. In the article “Economics after Neoliberalism”, Suresh Naidu, Dani Rodrik, and Gabriel Zucman call for a more inclusive view in economic thinking. The scientists demand “both that we consider the whole distribution of outcomes, not simply the average (the ‘middle class’), and that we consider human prosperity broadly, including non-pecuniary sources of well-being, from health to climate change to political rights.”

 

To improve the quality of public discussion around what they call inclusive prosperity, they organized a group of economists—the Economics for Inclusive Prosperity (EfIP) network—to make policy recommendations across a wide range of topics, including labor markets, public finance, international trade, and finance. The EfIP runs a page with essays from economists from all over the world with the aim “not simply to offer a list of prescriptions for different domains of policy, but to provide an overall vision for economic policy that stands as a genuine alternative to the market fundamentalism that is often—and wrongly—identified with economics.”

 

 

Links:

 

W. Brian Arthur, J. Doyne Farmer et al.: “Economics needs to embrace a transdisciplinary approach” (Boston Review, March 19, 2019)

 

The Economist: “Simple interactions can have unpredictable consequences” [Apr 2, 2019; restricted access]

 

Suresh Naidu, Dani Rodrik, Gabriel Zucman: “Economics after Neoliberalism” (Boston Review, Feb 15, 2019)

 

Homepage of the Economics for Inclusive Prosperity (EfIP) network

 


Event

Brainhack Vienna


Dec 11, 2019Dec 13, 2019

Complexity Science Hub Vienna

Event

CSH Talk by David B. Saakian: “Solving the evolutionary dynamics on fluctuating Landscapes”


Nov 18, 2019 | 11:0012:00

Complexity Science Hub Vienna

Visitor

Helena Miton, CEU, SFI


Oct 24, 2019

Event

CSH Talk by Helena Miton: “Explaning the spread and persistence of maladaptive medical beliefs”


Oct 24, 2019 | 15:0016:00

Complexity Science Hub Vienna

Press

Cooperative creativity experiment reveals most efficient team structures


Phys.org, Oct 15, 2019

Press

Forscher ermittelten optimale Zusammensetzung für konstruktive Teams


APA Science, Oct 14, 2019

Press

Statins May Affect Your Bone Health


New York Times, Oct 8, 2019

News

Oct 6, 2019

Out now: Sustainability colloquium | The Videos

Press

Czy leki na cholesterol powodują osteoporozę? [Polish]


wprost, Oct 4, 2019

News

Sep 30, 2019

Do statins increase osteoporosis risk?

News

Jun 11, 2019

Predicting success in show biz

News

Jun 5, 2019

13 Reasons Why | watching suicide in TV can be contagious

Event

Brainhack Vienna


Dec 11, 2019Dec 13, 2019

Complexity Science Hub Vienna

Event

CSH Talk by David B. Saakian: “Solving the evolutionary dynamics on fluctuating Landscapes”


Nov 18, 2019 | 11:0012:00

Complexity Science Hub Vienna

Visitor

Helena Miton, CEU, SFI


Oct 24, 2019

Event

CSH Talk by Helena Miton: “Explaning the spread and persistence of maladaptive medical beliefs”


Oct 24, 2019 | 15:0016:00

Complexity Science Hub Vienna

Press

Cooperative creativity experiment reveals most efficient team structures


Phys.org, Oct 15, 2019

Press

Forscher ermittelten optimale Zusammensetzung für konstruktive Teams


APA Science, Oct 14, 2019

Press

Statins May Affect Your Bone Health


New York Times, Oct 8, 2019

News

Oct 6, 2019

Out now: Sustainability colloquium | The Videos

Press

Czy leki na cholesterol powodują osteoporozę? [Polish]


wprost, Oct 4, 2019

News

Sep 30, 2019

Do statins increase osteoporosis risk?

News

Jun 11, 2019

Predicting success in show biz

News

Jun 5, 2019

13 Reasons Why | watching suicide in TV can be contagious

News

Oct 6, 2019

Out now: Sustainability colloquium | The Videos

News

Sep 30, 2019

Do statins increase osteoporosis risk?

News

Jun 11, 2019

Predicting success in show biz

News

Jun 5, 2019

13 Reasons Why | watching suicide in TV can be contagious

News

May 29, 2019

D4Dairy annual meeting at the Hub

News

Apr 11, 2019

Shocking Economics!

News

Apr 3, 2019

In need of ‘complexity economics’

News

Mar 20, 2019

Complex societies gave birth to big gods

News

Feb 6, 2019

New music styles: how the challenger calls the tune

News

Jan 30, 2019

Garcia, Bail, Rahwan, Couzin: Check out the videos!

News

Jan 1, 2019

Our new “Visions for Complexity”

News

Dec 4, 2018

A sad day for science: CEU forced out of Hungary

Event

Brainhack Vienna


Dec 11, 2019Dec 13, 2019

Complexity Science Hub Vienna

Event

CSH Talk by David B. Saakian: “Solving the evolutionary dynamics on fluctuating Landscapes”


Nov 18, 2019 | 11:0012:00

Complexity Science Hub Vienna

Visitor

Helena Miton, CEU, SFI


Oct 24, 2019

Event

CSH Talk by Helena Miton: “Explaning the spread and persistence of maladaptive medical beliefs”


Oct 24, 2019 | 15:0016:00

Complexity Science Hub Vienna

Event

CSH Workshop: “Modeling Neolithic Crises”


Oct 17, 2019 | 9:30Oct 18, 2019 | 17:00

Complexity Science Hub Vienna

Event

CSH Talk by Célian Colon: “Coupling transport and supply chains to analyze the impact of disasters – an application to the United Republic of Tanzania”


Oct 17, 2019 | 15:0016:00

Complexity Science Hub Vienna

Event

CSH Talk by William Schueller: “Active control of complexity growth in a multi-agent model”


Oct 18, 2019 | 15:0016:00

Event

CSH Planning Workshop on the Historical Dynamics of Social Norms and Sentiments Underlying Cooperation


Oct 21, 2019 | 9:30Oct 22, 2019 | 16:00

Complexity Science Hub Vienna

Talk

“Embracing Opportunities of Livestock Big Data Integration with Privacy Constraints”


Franz Papst.

Oct 25, 2019

University of Deusto

Event

CSH Talk by Jim Bennett: “A model of agrarian state–nomadic confederation interaction in the Old World”


Oct 16, 2019 | 15:0016:00

Visitor

Simon Levin, Princeton University


Oct 13, 2019Oct 16, 2019

Visitor

Saadi Lahlou, London School of Economics


Oct 13, 2019Oct 15, 2019

Press

Cooperative creativity experiment reveals most efficient team structures


Phys.org, Oct 15, 2019

Press

Forscher ermittelten optimale Zusammensetzung für konstruktive Teams


APA Science, Oct 14, 2019

Press

Statins May Affect Your Bone Health


New York Times, Oct 8, 2019

Press

Czy leki na cholesterol powodują osteoporozę? [Polish]


wprost, Oct 4, 2019

Press

El fin de una era: qué pasará cuando los ‘likes’ desaparezcan [Spanish]


El País, Oct 3, 2019

Press

Recomendamos: El fin de una era: qué pasará cuando los ‘likes’ desaparezcan [Spanish]


etcétera, Oct 3, 2019

Press

Vamos deixar de ver “likes”. E agora? [Portuguese]


JN, Oct 3, 2019

Press

À forte dose, les statines augmentent le risque d’ostéoporose [French]


Pourquoi docteur?, Oct 3, 2019

Press

Die Zukunft des Regierens: Politik in der Computersimulation


Der Standard, Oct 2, 2019

Press

MERYNS Sprechzimmer: Online oder Ordination?


ORF III, Oct 2, 2019

Press

Dr. med. Tele Medizin: Wird Gesundheit digital?


ORF III, Oct 2, 2019

Press

STATINES : A forte dose, c’est le risque d’ostéoporose? [French]


Santé Log, Oct 1, 2019