Exploring how complexity economics challenges mainstream paradigms and bridges insights from heterodox traditions into a new economic synthesis.
I was very intrigued to discover a novel ‚programmatic paper‘ on complexity economics these days that comes with the ambitious title „Complexity and Paradigm Change in Economics“. The paper is authored by Eric Beinhocker and Jenna Bednar and articulates key cornerstones of complexity economics as an internally coherent research program, that is increasingly challenging the economic mainstream on various levels.
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As such the emergence of complexity economics emulates the ‚origin story‘ of other heterodox traditions aiming to challenge the mainstream. Moreover, by explicating some key commitments and convictions the paper also indicates significant conceptual overlap between complexity economics in particular and heterodox economics more broadly conceived. This overlap concerns pillars widely shared in the heterodox community, like a commitment to scientific realism (e.g. here or here), the conviction that the economy is crisis-prone and, typically, out-of-equilibrium (e.g. here) or the notion of complex (adaptive) systems, where the whole is more than the sum of its parts and emergent phenomena arise from the interactions between entities (see, e.g., here).
Aside from these more conceptual alignments, there is also a significant overlap in terms of the suggested theoretical apparatus. In this context, the paper emphasizes the merits of thinking in terms of rational heuristics (in the tradition of Herbert Simon), evolutionary development (in the tradition of Schumpeter, Nelson & Winter as well as Hodgson & Knudsen or Bowles & Gintis) or planetary boundaries (like in Georgescu-Roegen or Raworth). It suggests using of the metaphor of a metabolism (as in Marx or modern Industrial Ecology) to emphasize the complex network structures governing economic processes (which resonates with classics from Veblen over Granovetter to Leontief, who applied this intuition in different constellations and contexts), which lend themselves to varieties of input-output and, especially, agent-based modeling (as in the works of Dosi et al.). Finally, the conception of a paradigm laid out in the paper as well as the call for greater interdisciplinary interaction resonate with a heterodox understanding of pluralism in economics (see here or here), without, however, mentioning the latter explicitly.
By providing a bird-eye’s view on the current state of the field the paper also gives some indications about potential complementarities: complexity economics brings a different, pragmatic as well as sophisticated, mind-set towards modeling to the table that has not only made some impressive advances in challenging mainstream assumptions (e.g. here) and models (e.g. here), but also could serve as a creative anchoring point for integrating arguments from different heterodox traditions in a joint modeling framework – including such that have not yet been convincingly formalized.
Heterodox economics on the other hand could complement complexity economics by its richer focus on social embedding and the associated historical conditionality of economic processes and dynamics. A key example is the notion of a socio-economic provisioning system as a core definition of the object of research, which not only resonates with the concept of a complex adaptive system, but would also open up complexity economics to – hitherto a little underrepresented – perspectives from feminist economics, stratification economics or radical economics. These perspectives could inform complexity research when it comes to understanding the role of unpaid work, social infrastructures or persistent power asymmetries.
Similarly, one could add that the paper is a little silent on the merit of Post-Keynesian ideas, although Keynesian notions, like endogenous money, effective demand, higher order expectations or path dependence, do, in my humble understanding, indeed inform complexity approaches on macro and finance. However, I shall not further lament on this paper, which is, at the end of the day, an excellent starting point for a further intensified interaction between complexity researchers and heterodox economists of all calls and brands ;-)
Enjoy your week and all the best,
