by Summary:
Traditional economic theory is rooted in a 19th- and 20th-century understanding of science and mathematics. At the simplest level, traditional theory assumes economies are linear systems filled with rational actors who seek to optimize their situation. Outputs reflect a sum of inputs, the system is closed, and if big change comes it comes as an external shock. The system’s default state is equilibrium. The prevailing metaphor is a machine. But this is not how economies are. It never has been. As anyone can see and feel today, economies behave in ways that are non-linear and irrational, and often violently so. These often-violent changes are not external shocks but emergent properties—the inevitable result—of the way economies behave.... Machine view [physical] : Wealth = individuals
Topics:
Mike Norman considers the following as important: complex adaptive systems, complexity economics, conventional economics, systems theory
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Traditional economic theory is rooted in a 19th- and 20th-century understanding of science and mathematics. At the simplest level, traditional theory assumes economies are linear systems filled with rational actors who seek to optimize their situation. Outputs reflect a sum of inputs, the system is closed, and if big change comes it comes as an external shock. The system’s default state is equilibrium. The prevailing metaphor is a machine. But this is not how economies are. It never has been. As anyone can see and feel today, economies behave in ways that are non-linear and irrational, and often violently so. These often-violent changes are not external shocks but emergent properties—the inevitable result—of the way economies behave.... Machine view [physical] : Wealth = individuals
Topics:
Mike Norman considers the following as important: complex adaptive systems, complexity economics, conventional economics, systems theory
This could be interesting, too:
Mike Norman writes David Ricardo’s explanation of the case for free trade rests on some basic economic principles, but also has a big public policy blind spot — Miles Corak
Mike Norman writes The old guard trying to stay relevant and failing — Bill Mitchell
Mike Norman writes Planetary Thinking — Eric Berglöf
Mike Norman writes Is There Really A Trade-Off Between Inflation And Unemployment? — Brian Romanchuk
Traditional economic theory is rooted in a 19th- and 20th-century understanding of science and mathematics. At the simplest level, traditional theory assumes economies are linear systems filled with rational actors who seek to optimize their situation. Outputs reflect a sum of inputs, the system is closed, and if big change comes it comes as an external shock. The system’s default state is equilibrium. The prevailing metaphor is a machine.
But this is not how economies are. It never has been. As anyone can see and feel today, economies behave in ways that are non-linear and irrational, and often violently so. These often-violent changes are not external shocks but emergent properties—the inevitable result—of the way economies behave....
Machine view [physical] : Wealth = individuals accumulating moneyGarden view [biological] : Wealth = society creating solutions
One of the simple and damning limitations of traditional economics is that it can’t really explain how wealth gets generated. It simply assumes wealth. And it treats money as the sole measure of wealth. Complexity economics, by contrast, says that wealth is solutions: knowledge applied to solve problems. Wealth is created when new ideas— inventing a wheel, say, or curing cancer—emerge from a competitive, evolutionary environment. In the same way, the greatness of a garden comes not just in the sheer volume but also in the diversity and usefulness of the plants it contains.
In other words, money accumulation by the rich is not the same as wealth creation by a society. If we are serious about creating wealth, our focus should not be on taking care of the rich so that their money trickles down; it should be on making sure everyone has a fair chance—in education, health, social capital, access to financial capital— to create new information and ideas. Innovation arises from a fertile environment that allows individual genius to bloom and that amplifies individual genius, through cooperation, to benefit society. Extreme concentration of wealth without modern precedent that has undermined equality of opportunity and thus limited our overall economic potential.…Economist Kenneth E. Boulding joined biologist Ludwig von Bertalanffy in founding the discipline of general systems theory. It was the precursor of evolutionary economics also known as complexity economics. Kenneth Boulding's economics was close to MMT, and MMT economists have recognized him as a precursor. Boulding and his wife Elise were prominent Quaker peace activists. Boulding also worked in conflict studies and emphasized love as a foundation of well-functioning society and economy.
Evonomics
Complexity Economics Shows Us Why Laissez-Faire Economics Always Fails—Markets are a type of ecosystem that is complex, adaptive, and subject to the same evolutionary forces as nature
Eric Liu and Nick Hanauer