The New York Times’ resident sage of liberal economics, Paul Krugman, has frequently extolled the humility required to change one’s position in the face of new evidence. He has been especially vocal about this since the global financial crisis hit in 2008, in the aftermath of which Krugman has also admitted the failure of economists (except the odd outlier) to predict the GFC. And Krugman is hardly the sole voice airing such opinions in recent years.
Ancient Sumerian myth mentions a beast called Humbaba, sprouting all sorts of scary appendages, which could serve well as the mascot for the multifaceted economic challenges of our age.
There is strong suspicion, bordering on certainty, among some economics leading lights (Bank of England Chief Economist Andrew Haldane is one) that the escalating complexity of our world may be getting too knotty for traditional economics to tackle on its own. Thomas Piketty has already created big waves by breaking out the self-imposed constraints of contemporary economics and taking into account a vast swathe of history in his persuasive analyses.
So what makes most economists – especially macroeconomists, whose domain is more troubled – so stubbornly resist efforts by deeply concerned groups within science (not social science, under which rubric traditional economics sits) to extend collaborative feelers with tools and analogies from sciences such as evolutionary biology? (Although, I admit, some of these feelers are rather prickly, with dropped hints of an armchair revolution, too!)
I am referring to an event that has flown under the radar for most mainstream media: the Ernst Strüngmann Forum at the Frankfurt Institute for Advanced Studies, held in February this year with two stated goals:
- To extend the theoretical foundation of economics and public policy by integrating complex systems theory and evolutionary theory
- To put a synthesis of complex systems theory and evolutionary theory to work in solving problems of basic research as well as real-world applications ranging from individual behavior to global economic systems.
Both appear to be laudable objectives, coming as they do at a time when the notion ofHomo Economicus – the individual as a rational, always self-interested entity – looks like so much wispy vapourware spun by traditional economics. Ours is an age when the information fed to and leaked by individual consumers (that word always, for me, brings the Sarlacc to mind) is susceptible to gargantuan manipulation on a global scale – using everything from clever PR spin and Thalerian psychological ‘nudges’ to mentally-siloising ‘recommendations’ and jiggery-pokery by hush-hush agencies of the state – the rationality of the individual, already shown to be often illusory by the likes of Daniel Kahneman and Amos Tversky decades ago, is almost meaningless.
We as individuals as well as groups are swayed by well-documented cognitive biases which are becoming more intractable in the 21st century. (A great fan of LinkedIn’s Influencers program? While it is certainly a good move in some ways, do have a good read of at least the abstract at this link). In such circumstances, the power of prediction that is presumed to drive traditional economics appears little better than a visit to the local psychic medium for a peek into tomorrow.
So a group of concerned scientists – who are as affected by the crisis in economics as the rest of us – gets together and puts on the table things to ponder jointly with macroeconomists. Some of these things are:
- Using studies of collective behaviour in animals to determine when the much-hyped ‘wisdom of the crowds’ works, and when it doesn’t – science that has great relevance to the structure of management teams.
- Using neurocognitive science and complex computer modelling to work towards creating software analogies of individuals and groups.
- Seeing if we can learn from the behaviour of large colonies of single-celled organisms, in which some biologists see parallels with the behaviour of human economies.
Even at first glance, the proposals are well worth investigating collaboratively, especially as a way of breaking the ice between two major areas of human endeavour where one party is looking a little frayed.
So why is the immediate reaction of many economists drily sceptical, with more than a trace of hostile hauteur?
A mite cynically, a quote from Upton Sinclair comes to mind: “It is difficult to get a man to understand something when his salary depends on his not understanding it”. The ‘salary’ is replaceable with the ‘security’ or ‘comfort’ of our resisting economists here, perhaps.
One American economist even argues that because our politicians favour ‘simplicity’, such allegedly ‘complex’ advice from the sciences is a no-no. This simplistic argument does have more than a modicum of truth in it, sadly. A quick look at the educational backgrounds of some of the political leadership of the developed world, in our age of furious scientific and technological change, may suggest why:
|Barack Obama||Law School|
|David Cameron||PPE (Philosophy, Politics and Economics)|
|François Hollande||Political Studies|
|Tony Abbott||PPE (Philosophy, Politics and Economics)|
|Shinzo Abe||Political Science|
To paraphrase the great JBS Haldane (related to Andy Haldane? Not sure), our economic reality is not only more complex than we imagine, but more complex than we can imagine. It would be good for economics, politics, and the sciences to get together and have a better go at wrestling down this snorting beast of economic complexity.
(Humbaba Image Credit: Cipher-Studios.com)