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Too big not to fail? Insights from Complexity Economics
The Depression.org posted a debate between James Rickards and Ann Pettifor which got us thinking about the burgeoing field of ‘complexity economics’.
Traditional economics assumes markets tend to equilibrium. Economies are have more in common with an ecosystem than a machine. The Santa Fe Institute says “Economies are living networks of interacting agents. As they transform energy and materials to meet human needs, economies evolve, often in unforeseen ways.”
'Complexity economics' suggests volatility is inherent to advanced economies, and ‘engineering’ approaches to economic policy is inadequate.
The main insight is that economic policy should fail. And fail often.
- Rather than predict we should experiment, setting up lots of small-scale experiments to find what works and what doesn’t
- Policies and institutions should be as adaptable as possible.
- Policymakers should think of themselves as gardeners not mechanics, creating the conditions under which interacting agents adapt towards socially desirable outcomes.
Here's Eric Beinhocker on the subject.
At Prosper, we uphold an intellectual tradition taking 'unconcious cooperation' very seriously.
We aim to reform the way individuals relate to commons, while maintaining competition and free enterprise. Guarding against monopoly ensures diversity and resilience.
'Complexity economics' demands that we avoid dogged attachment to certainty; try different policies out at a small-scale; adjust theories in-line with new evidence; and empower our politicians to fail.
In other news...
Infrastructure Australia: Broad-based land tax is the best form of value capture finance for infrastructure. Next time the government says it cant afford to build, wave this report in their face. David's commentary here
Corrupted by rent-seeking opportunity, Eddie Obeid is going away.
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