Key points
- Complex Economists: Some of the key assumptions of neoclassical economics are somehow untrustworthy
- Traditional economists: Complex economics needs more evidence of the superiority of its theories and frameworks
This article is 1998 words long and takes 6 minutes to read.
Brian Arthur, a member of the Rohan Hall Academic Council and founder of complex economics, wrote in his book Complex Economics: A New Framework for Economic Thought: "Every once in a while, a discipline falls into a period of turmoil. Old ideas that were once taken for granted no longer seem so reliable, and scholars are looking for ideas that can replace them. Economics is in such a period right now. ”
Unlike neoclassical economics, complex economists argue that some of the key assumptions in traditional economics, such as complete rationality, general equilibrium, diminishing returns, and problems faced by individuals, have become somewhat untrustworthy and overly rigid. "Beyond the standard neoclassical approach, the door of economics has been opened to other approaches," Arthur wrote.
Advances in digital technology have made the world more connected. The independent individuals that make up a society are interconnected and influence each other, and the world is becoming an increasingly complex system. Complexity studies suggest that interacting elements in a system create a pattern that in turn causes the elements in it to change or adapt.
Whether it's cars in road traffic responding to neighboring cars, or cells in human systems responding to other cells and viruses, complexity theory explores how individual elements respond to the patterns they create, and what patterns will eventually emerge.
Questioning and challenging
As an emerging discipline that has only been in existence for more than 30 years, it is not easy for complex economists to challenge the basic assumptions and ideas that neoclassical economics has pursued over the past 150 years.
The eighth edition of the Rohan Church Frontier Dialogues brought together a number of experts from around the world with deep understanding and achievements in the field, including Arthur, the founder of complex economics, and four Nobel Laureates in economics— Alvin Roth, Thomas Sargent, Bengt Holmström and Eric Maskin. At this seminar, complex economics was also challenged and questioned by mainstream economists.
Eric Maskin, a member of the Rohan Hall Academic Council, a 2007 Nobel laureate economist and a professor at Harvard University, pointed out in a Q&A session that complex economics is still outside the mainstream economics.
Citing the example of behavioral economics and its prospect theory pioneered by Daniel Kahneman and Amos Tversky, he points out that behavioral economics has been recognized by the economics community and has been so successful because it has found loopholes in traditional economics and found more effective alternatives. Professor Maskin believes that complex economists need to come up with more evidence to illustrate the superiority of their theories and frameworks.
In response to Muskin's questioning, Oxford University professor Doyne Farmer believes that complex economics is a revolution. Compared with traditional economics, it uses a very different methodology. However, Famar agrees that complex economists also need to do a better job of predicting, assessing, and understanding the role of policy in society as a whole. He also pointed out that a large number of academic works are being precipitated in the field of complex economics, and he hopes that the academic community can give complex economics a "fair listening" and mainstream journals can also publish papers related to complex economics. Famar cited game theory as an example that it took more than half a century to be widely accepted by the academic community, hoping that everyone would give a little more time to complex economics.
Yale University Professor John Geanakoplos was a guest speaker at the symposium. He believes that complex economics studies a series of chaotic and dynamic phenomena such as non-equilibrium, adaptive, evolutionary, increasing returns, and path dependence, just like real life. There are many reasons why complex economics thrives, but two of the most important. First, complex economics blends knowledge from multiple disciplines with openness and collaboration. Second, it represents a trend back to the essence of economics.
It is well known that neoclassical economics was also a completely new interdisciplinary thing in its infancy, which relied heavily on computing. The birth of complex economics is not accidental, it came into being with the development of computer technology. Gennakopoulos argues that economics has come a time to return to its roots, embrace the knowledge of other disciplines and new methods of computation, and that economists should learn more about the ideas of other disciplines as they have in the past.
Wang Neng, a professor at Columbia University, commented that complex economists may need to redefine the discipline because mainstream economic theory already encompasses network economics and some other ideas to a large extent.
Alissa Kleinnijenhuis, a researcher at Stanford University's Institute of Economic Policy, believes that in the financial field, the complex economics perspective is applied to the models of many mainstream economics papers, which shows that complex economics has made great progress in recent years. In addition, in the industrial world, the concept of complex economics has also been widely accepted.
conclusion
Finally, Arthur concluded that complex economics would coexist with neoclassical economics, just as nonlinear mathematics never replaced linear data, relativity and quantum physics coexisted with Newtonian theory, as both schools were socially needed.
Many people think that complex economics deviates from reason. Arthur didn't think so. "I want to remind everyone that strictly speaking, every individual is in a state of uncertainty. They don't know what other people are doing in a particular model, and each individual is in the midst of discovery behavior. ”
Arthur argues that complex economics is not intended to replace traditional economics. Complex economics does not assume equilibrium or rationality, and attempts to look at economic problems from a more practical perspective. "We will use different forms of economics, behavioral economics, and complex economics to solve non-equilibrium, undefined situations."
Pay attention to the "Luohantang Viewpoint" WeChat public account and don't miss the new knowledge of social science in the digital age.