Table of Contents

Complexity and the Economy

Complexity and the Economy

Implications for Economic Policy

Edited by John Finch and Magali Orillard

The authors examine the causes and consequences of complexity among the broadly economic phenomena of firms, industries and socio-economic policy. The book makes a valuable contribution to the increasingly prominent subject of complexity, especially for those whose interests include evolutionary, behavioural, political and social approaches to understanding economics and economic phenomena.

Chapter 2: Individual and Aggregate Behaviour: Of Ants and Men

Alan Kirman

Subjects: economics and finance, evolutionary economics, institutional economics

Extract

Alan Kirman Major advances in science often consist in discovering how macroscale phenomena reduce to their microscale constituents. These latter are often counterintuitive conceptually, invisible observationally, and troublesome experimentally. Knowledge of the molecular and cellular levels is essential, but on its own it is not enough, rich and thorough though it be. Complex effects, such as representing visual motion, are the outcome of the dynamics of neural networks. This means that while network properties are dependent on the properties of the neurons in the network, they are nevertheless not identical to cellular properties, nor to simple combinations of cellular properties. Interaction of neurons in networks is required for complex effects, but it is dynamical, not a simple wind-up doll affair. (Churchland and Sejnowski 1995) INTRODUCTION There are two competing views of how the economy works. One of these is mathematically rigorous and internally consistent. It gives us a framework within which we can build models and prove results and is clearly the dominant paradigm at the moment. Its disadvantages are that it does not have testable assumptions, is poor at predicting and simply does not seem very realistic. The other view is far from being complete, often involves borrowing techniques from other disciplines in an ad hoc way, and does not, in general, yield elegant theorems. However it provides a more realistic view of the economy and offers the promise of being testable against empirical data. The first view focuses on the existence of efficient states of the economy....

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