Complexity and Economic Policy: A Paradigm Shift or a Change in Perspective? A Review Essay on David Colander and Roland Kupers's Complexity and the Art of Public Policy
Journal of Economic Literature
vol. 54,
no. 2, June 2016
(pp. 534-72)
Abstract
In their recent book, Colander and Kupers (2014) argue that viewing the economy as a complex adaptive system should change the way in which we make economic policy. This would necessitate a paradigm shift. Economics has, over time, tried to produce a coherent model to underpin the dominant laissez-faire liberal approach. But we have never proved, in that model, that left to their own devices, the participants in an economy will self-organize into a satisfactory state. This is an assumption. Complex interactive systems with direct interaction between heterogeneous agents may show no tendency to self-equilibrate and will undergo endogenous crises. Economists should concentrate on the emergence of certain patterns. Colander and Kupers suggest that we may be able to nudge the system into "good" basins of attraction. A more radical view is that there are no fixed basins of attraction; these change with the evolution of the system and it is illusory to believe that we can choose good basins. We may be able to recognize and influence the emergence of certain states of the economy, but we are far from Leon Walras's dream of economics as a science like astrophysics.Citation
Kirman, Alan. 2016. "Complexity and Economic Policy: A Paradigm Shift or a Change in Perspective? A Review Essay on David Colander and Roland Kupers's Complexity and the Art of Public Policy." Journal of Economic Literature, 54 (2): 534-72. DOI: 10.1257/jel.54.2.534Additional Materials
JEL Classification
- B10 History of Economic Thought through 1925: General
- B20 History of Economic Thought since 1925: General
- C63 Computational Techniques; Simulation Modeling
- D04 Microeconomic Policy: Formulation, Implementation, and Evaluation
- E61 Policy Objectives; Policy Designs and Consistency; Policy Coordination