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Complexity & a New Economics Paradigm

The following was written in fall 2019 together with colleagues from ASU’s Biosocial Complexity Initiative and the IASS Potsdam. It was inspired by my previous post on complexity economics, which initiated a brief Twitter exchange with an economist from INET Oxford. Furthermore, it is addressed to the Forum for New Economy in Berlin, especially Michael Jacobs’ piece on a new paradigm in economic thinking. In May 2021 I added a section on Martin Gurri’s Revolt of the Public which links a complexity view with his framework.

In the spirit of the new economic paradigm put forth by Michael Jacobs at the Forum for a New Economy Launch this past Halloween, we would like to offer some insights from complexity studies for thinking about this new paradigm.We hold that the economy is a quintessential example of a complex adaptive system (CAS), characterized by multi-level interactions between learning agents operating with incomplete information, emergent patterns, and path dependent development. The overall economic system can be conceived as multiple systems which partially overlap one another, encompassing what might be traditionally delineated as social, political and environmental realms.

What can this conceptualization of the economic system tell us? Here we offer three specific examples of how complexity studies could contribute to a new economic paradigm. The first is a pragmatic recognition of the limitations of predictions within complex systems. Friedrich von Hayek, in his 1972 Nobel Speech, The Pretense of Knowledge, admonishes economists for their use of scientific methods developed for studying relatively non-complex physical systems to analyze complex economic systems, and the profession’s fixation on achieving precise numerical solutions to economic problems rather than trying to understand the underlying way the economy works, albeit in a descriptive and less precise way. “I prefer true but imperfect knowledge, even if it leaves much undetermined and unpredictable, to a pretense of exact knowledge that is likely to be false.” In this regard, we believe that CAS reinforces skepticism in our ability to predict the outcomes of economic policy and the confidence with which the economics profession often describes both the world and itself.

Podcast Episode #1: Arnold Kling – A complexity thread in his thinking?

For my first podcast episode, I had the opportunity to interview Arnold Kling. I aimed to discuss whether Arnold sees a complexity thinking thread running through his work. We covered a lot of topics, including the how to think about economic activity, a critique of mainstream Economics, VC & startups, Arnold’s 3-axis model for political discourse, BLM & racism, post-modernism in universities, cultural evolution, and even Israeli dance.

I highly recommend you dig into Arnold’s work. Be sure to check out Arnold’s blog and his multiple appearances on Econtalk. For a distilled presentation of his ideas on economics and political dialogue, check out 2 of his concise books: Specialization and Trade and The Three Languages of Politics.

For context on my own views on complexity & economics, check out a previous blog post critiquing complexity economics from a Hayekian epistemological humbleness position.

You can download the podcast here, and find the Youtube video below.

Multiculturalism and immigrants in North America vs Europe: Toronto vs Berlin

In this article I sketch out a model of immigration and multiculturalism for Western Europe and Canada (and the US?), using Berlin and Toronto as examples. It’s largely based on cultural observations and some quick history. Feel free to nitpick, but keep in mind I am trying to paint a broad description and model for thinking it through.

A few articles worth reading

I was recently inspired by Arnold Kling’s blog post questioning the value of reading books as a way to learn: “The educational return on investment for the consumer is highest on essays and blog posts…Before you read the book you should search for an essay by the author that is the basis for the book.” I agree, and have found that time is better spent reading blog posts, articles summarizing books, criticisms and reviews of those posts, short video lectures, and even viewing all or part of a good MOOC (Russ Roberts at Econtalk did an ensuing podcast with Andy Matuschak, who inspired Kling in the first place. They emphasized the value of non-written learning sources such as MOOCs).

Thus, I have decided to start producing a list of articles that strike me as high bang-for-your-buck, and helped start a change in perspective I have had on an issue.

1. Devourer of Encyclopedias: Stanislaw Lem’s “Summa Technologiae”. David Auerbach. A very nice ‘summary and discussion’ of Stanislaw Lem’s Magnus Opus Summa Technologiae (500 plus pages). I really liked the book, but it is a tough slog. The article gives a taste of the book and its relevance, and is also an in-road into thinking about a lot of interesting ideas: artificial intelligence, evolutionary biology and evolutionary psychology, synthetic life, information theory, entropy and thermodynamics, complexity theory, the “singularity.” Added coolness: Lem was thinking about this stuff back in the 1960s from behind the Iron Curtain in Poland (along with writing Sci-Fi classics like Solaris).