Below is a summary of 2 posts I made in the INET YSI Complexity Economics group last week, with regards to the reading list they have for their internal complexity economics group (see below). My posts describe an uneasiness with the application of complexity ideas to economics that seems fairly common (ie at INET’s Oxford Martin School). My general critique is that ‘complexity economics’ stills remains a rather narrow-minded field. Furthermore, this is somewhat emblematic of YSI & INET altogether. See a few critiques of ie the 2017 INET Conference here and here. (The William Janeway keynote dinner talk was my highlight, along with the Perry Merhling-Isabella Kaminska crypto session as part of the YSI pre-conference workshops coverage here in FT Alphaville and the session video).
How to approach complexity as an economics student? I advocate trying to first really understand some of the powerful ideas behind complexity (emergence, complex adaptive systems, chaotic sensitivity to initial conditions, the dynamics of outcomes of cellular automaton, uncertainty, the difficulty modelling and understanding complex phenomenon), and then using this to think through economic/political/cultural problems.
Here’s the comment, and the syllabus is found at the end of this post.
Hi All, I have noticed that this reading group is still largely focused on economics at the expense of ‘complexity’: ie with articles from David Graeber, Perry Merhling, and the ‘complexity stuff’ coming from ie Doyne Farmer, Schelling, etc. In my opinion much of this work would be (and is) otherwise covered in other courses which YSI scholars are largely familiar with – and thus this course potentially serves to in some way reinforce a “broadened” narrow understanding of complexity economics. For those interested in another way to tackle complexity ( & economics) I suggest taking a step out of the economics discourse directly, and trying to first understand the basics of complexity. Melanie Mitchell’s Introduction to Complexity MOOC with the Santa Fe institute provides one of the clearest such looks at a wide-range of complexity issues (I believe both Brian Arthur and Doyne Farmer are interviewed in the lectures). https://www.complexityexplorer.org/courses/89-introduction-to-complexity-spring-2018-spring-2019. “
Here is a part of my follow-up message, in reply to suggestions for relevant complexity economics work the group could read.
“I am afraid I am not particularly up-to-date (however below I do link to 2 papers). Furthermore, having thought about your comment, I find myself advocating to only use complexity as a warning that we must employ high epistemologic uncertainty regarding methods of evaluating or understanding economic and social processes (sidenote see Russ Roberts of Econtalk in general). For instance, at my institute the IASS Potsdam (transdisciplinary sustainability think tank), we are engaging with complexity ideas in application to societal risks (incl financial crises). Currently, I am working on an EU-funded project which tries to use complexity principles to understand technological innovations within the framework of the precautionary principle. Here, the use of complexity is rather used to elicit epistemological humbleness in the face of uncertainty regarding highly-complex processes (ie gene-editing, Crispr, GMOs, financial innovation, AI.)
Coming full-circle to my initital comment, another paper we wrote last year together with YSI member Steffen Murau (and under the direct influence of Perry Merhling ironically), at best employs the epistemological uncertainty derived from complexity to develop potential scenarios (scenarios building being another tool or consequence for dealing with complexity) for the development of the IMS which would be implied by the Money View’s understanding of money creation, shadow banking, the USD and C6 swap lines. Take a look here: (https://ssrn.com/abstact=3191786 or http://dx.doi.org/10.2139/ssrn.3191786).
Where to look for different complexity economics ideas? Here is just a top of the head list:
1) Use complexity to compare economics schools: Barkley Rosser has a set of articles trying to see how various economics schools exhibit complexity ideas (ie Austrian, post-keynesian, and behavourial economics.
2) Applied to political/economic history in a co-evolutionary way: Yuen Yuen Ange’s How China Escaped the Poverty Trap applies a complex adaptive systems approach to China’s growth.
3) Read and think through any economics, political economy, and financial system work you are doing with a complexity and CAS viewpoint. Someone like Russ Robert’s implicitly brings up complexity and adaption in many of his Econtalk interviews. Try-out putting his lens on when thinking through problems.
4) Many essays by Friedrich Hayek touch on the ideas of emergent order, information exchange via prices, etc
Appendix: Here I repost the reading list, which is still a good start, but nonetheless I feel is: a) a bit narrow; b) kind of missing the opportunity to get across more critical views of economics.
WEEK 1 / 2: MODULE 1: ABMs in Economics
- Schelling, Thomas C. “Dynamic models of segregation.” Journal of mathematical sociology 1.2 (1971): 143-186.
- Bouchaud, J.-P. & Mézard, M. Wealth condensation in a simple
model of the economy. Physica A: Statistical Mechanics and its
Applications 282, 536–545 (2000).
- Inoue, H. & Todo, Y. Firm-Level Simulation of Supply Chain Disruption Triggered by Actual and Predicted Earthquakes. SSRN Electronic Journal (2017). doi:10.2139/ssrn.3074997
- Carvalho, V. M., Nirei, M., Saito, Y. & Tahbaz-Salehi, A. Supply Chain Disruptions: Evidence from the Great East Japan Earthquake. (Social Science Research Network, 2016).
WEEK 3 / 4: MODULE 2: ABMs in Finance
- Chapter 5: What do dealers do? in “The New Lombard Street” by Dr. Perry Mehrling
- Farmer, J. D., Patelli, P. & Zovko, I. I. The Predictive Power
of Zero Intelligence in Financial Markets. arXiv:cond-mat/0309233
- Gai, Prasanna, Andrew Haldane, and Sujit Kapadia. “Complexity, concentration and contagion.” Journal of Monetary Economics 58.5 (2011): 453-470.
- Klimek, Peter, et al. “To bail-out or to bail-in? Answers from an agent-based model.” Journal of Economic Dynamics and Control 50 (2015): 144-154.
WEEK 5 / 6: MODULE 3: Economic evolution
- Friedman, Daniel. “On economic applications of evolutionary game theory.” Journal of Evolutionary Economics 8.1 (1998): 15-43.
- Whitley, Darrell. “A Genetic Algorithm Tutorial.” (http://cobweb.cs.uga.edu/~potter/CompIntell/ga_tutorial.pdf)
- Chapter 9: Reluctant Entrepreneurs in “Poor Economics” (Carolina can photocopy)
- Bullshit Jobs by David Graeber (https://strikemag.org/bullshit-jobs/)
WEEK 7: MODULE 4: Technology evolution
- Arthur, W. Brian. “Competing technologies, increasing returns, and lock-in by historical events.” The economic journal 99.394 (1989): 116-131.
- McNerney, James, et al. “Role of design complexity in technology improvement.” Proceedings of the National Academy of Sciences 108.22 (2011): 9008-9013.
WEEK 8 / 9:MODULE 5: Economic Networks
- Walter W. Powell, “Neither Market nor Hierarchy: Network Forms of Organization” (1989)
- Lyon, F. Trust, Networks and Norms: The Creation of Social Capital
in Agricultural Economies in Ghana. World Development 28, 663–681
- Penny Mealy, J. Doyne Farmer and Alexander Teytelboym “Interpreting Economic Complexity” Science Advances (2019)