considerable publicity in some of the leading general science journals such as Science and Nature. While most of this research has appeared in physics journals, some has appeared in economics journals as well, more often when at least one author is an economist. Strong claims have been made by some advocates regarding its reputed superiority to economics (McCauley, 2004), with arguments that in fact the teaching of microeconomics and macroeconomics as they are currently constituted should cease and be replaced by (...) appropriate courses in mathematics, physics, and some other harder sciences. The lack of invariance principles in economics and the failure of economists to deal properly with certain empirical regularities are held against it in this line of argument, although most econophysicists do not go as far as McCauley in proposing the complete replacement of economics as such by econophysics. (shrink)
“When demand and supply are in stable equilibrium, if any accident should move the scale of production from its equilibrium position, there will be instantly brought into play forces tending to push it back to that position; just as if a stone hanging by a string is displaced from its equilibrium position… But in real life such oscillations are seldom as rhythmical as those of a stone hanging freely from a string; the comparison would be more exact if the string (...) were supposed to hang in the troubled waters of a mill-race, whose stream was at one time allowed to flow freely and at another partially cut off. Nor are these complexities sufficient to illustrate all the disturbances with which the economist and the merchant alike are forced to concern themselves. (shrink)
Three principles of dialectical analysis are examined in terms of nonlinear dynamics models. The three principles are the transformation of quantity into quality, the interpenetration of opposites, and the negation of the negation. The first two of these especially are interpreted within the frameworks of catastrophe, chaos, and emergent dynamics complexity theoretic models, with the concept of bifurcation playing a central role. Problems with this viewpoint are also discussed.
This paper examines the rising competition between computational and dynamic conceptualizations of complexity in economics. While computable economics views the complexity as something rigorously defined based on concepts from probability, information, and computability criteria, dynamic complexity is based on whether a system endogenously and deterministically generates erratically dynamic behavior of certain kinds. On such behavior is the phenomenon of emergence, the appearance of new forms or structures at higher levels of a system from processes occurring at lower levels. While the (...) two concepts can overlap, they represent substantially different perspectives. A competition of sorts between them may become more important as new, computerized market systems emerge and evolve to higher levels of complexity of both kinds. (shrink)
We consider Friedrich Hayek’s Road to Serfdom in light of global ideological and economic developments during the sixty years since its publication. Specific problems considered include socialism and planning, whether national socialism was really socialism, whether Hayek’s views could be labeled as social democratic and whether his critique of social democracy was too strong, and his discussion of the prospects for international economic order. While often right and enormously influential, Hayek himself agreed that some of his predictions did not become (...) true. (shrink)
The science writer, John Horgan (1995, 1997), has ridiculed what he labels “chaoplexology,” a combination of chaos theory and complexity theory. A central charge against this alleged monstrosity is that it, or more precisely its two component parts separately, are (or were) fads, intellectual bubbles of little consequence. They would soon disappear and deservedly so, once scholars and intellects realized what worthless dross they truly were (or are). As the culminating centerpiece of his argument, Horgan introduced the label, “the four (...) C’s,” which consist of cybernetics, catastrophe theory, chaos theory, and complexity theory. More.. (shrink)
This paper considers the implications of complex ecologic-economic dynamics for three broad, Post Keynesian perspectives: the uncertainty perspective, the macrodynamics perspective, and the Sraffian perspective. Catastrophic, chaotic, and other complex dynamics will be seen as reinforcing the conceptual foundations of Keynesian uncertainty. Predatory-prey models will be seen as deeply linked to Post Keynesian macrodynamic models. Finally, certain cases in ecologiceconomic systems will be seen as generating such Sraffian, capital theoretic conundra as reswitching. Ecologic-economic models considered besides predator-prey will include fisheries, (...) forestry, lake dynamics, and global climatic-economic dynamics. (shrink)
Ever since the collapse of Soviet-bloc socialism, and the associated breakup of the Soviet Union itself, it has been accepted by the vast majority of political economists that Friedrich A. Hayek and his fellow Austrians, notably his mentor, Ludwig von Mises, were the unequivocal victors in the famous “socialist calculation debate” that had raged for a good seven decades. It was over. The anti-socialist, Austrian position had won. Market capitalism was triumphant in both theory and practice. The combination of lack (...) of incentives and inevitably dispersed and asymmetric information had doomed command central planning of economies, especially in an increasingly complicated modern world economy (Rosser and Rosser, 2004, Chap. 3). (shrink)
This volume represents a magnum opus by Wolfgang Weidlich, summarizing his long work in the area of sociodynamics. It lays out the origins and development of his ideas on this topic, presents a variety of applications drawn from his previous work, and offers some new insights and suggestions. For those acquainted with Professor Weidlich’s work it is a satisfying summing up. For those unacquainted with it, the book provides a good overview and discussion of what is involved in it, both (...) its weaknesses and its strengths. It has a definite predecessor, Weidlich’s 1983 book with his frequent coauthor, Günter Haag, Concepts and Models of a Quantitative Sociology, but goes well beyond the arguments and models presented in that volume. (shrink)
We examine the “new comparative economics” as proposed by Djankov et al. (2003) and their use of the concept of an institutional possibilities frontier. While we agree with their general argument that one must consider a variety of institutions and their respective social costs, including legal systems and cultural characteristics, when comparing the performance of different economic systems, we find various complications and difficulties with the framework they propose. We propose that a broader study of clusters of institutions and such (...) newly emerging forms as the new traditional economy may be better suited as ways to approach the study of comparative economics in the era after the breakdown of the old comparison of market capitalism and command socialism that came to an end with the breakup of the Soviet Union. (shrink)
In discussing the nature of econophysics, a primary issue must be to understand what it is. This is a rather complicated matter, but attempts at definition have been made. As the neologizers of the term, Rosario Mantegna and H. Eugene Stanley have a distinct authority in this matter. They have proposed the following to define “the multidisciplinary field of econophysics …[as] a neologism that denotes the activities of physicists who are working on economics problems to test a variety of new (...) conceptual approaches deriving from the physical sciences” [2, pp. viii-ix]. (shrink)
This paper will focus upon the confluence of two strands of discussion and debate that have been developing for some time and their interaction and mutual implications. One involves the nature of economic complexity, how it is to be defined, what is the best way of thinking about it, both theoretically and empirically. The other is the question of the nature and relevance for economics of the recently developed sub-discipline of econophysics. Debates over both of these strands have become more (...) intensified in recent years, and this observer sees the debates as having. (shrink)
This paper argues that a new economic system is emerging in the world economy, that of the new traditional economy. Such an economic system simultaneously seeks to have economic decision making embedded within a traditional socio-cultural framework, most frequently one associated with a traditional religion, while at the same time seeking to use modern technology and to be integrated into the modern world economy to some degree. The efforts to achieve such a system are reviewed in various parts of the (...) world, with greater analysis of the Islamic and neo- Confucian economic systems. (shrink)
Much empirical analysis and econometric work recognizes that there are nonlinearities, regime shifts or structural breaks, asymmetric adjustment costs, irreversibilities and lagged dependencies. Hence, empirical work has already transcended neoclassical economics. Some progress has also been made in modeling endogenously generated cyclical growth and fluctuations. All this is inconsistent with neoclassical general equilibrium. Hence there is growing evidence of Kuhnian anomalies. It therefore follows that there is a Kuhnian crisis in economics and further research in nonlinear dynamics and complexity can (...) only increase the Kuhnian anomalies. This crisis can only deepen. However, there is an ideological commitment to general equilibrium that justifies “free enterprise” with only minimal state intervention that may still sustain neoclassical economics despite the growing evidence of Kuhnian anomalies. Thus, orthodox textbook theory continues to ignore this fact and static neoclassical theory remains a dogma with no apparent reformulation to replace it. (shrink)
Relationships are studied between the non-observed economy, income inequality, corruption, social capital measured as trust, and various institutional quality, policy, and macroeconomic variables for a global data set of countries for two time periods accounting for social interactions. Tentative support is found for positive relations between the non-observed economy and income inequality, the non-observed economy and corruption, and a negative relation between corruption and trust. No significant relation was found between the nonobserved economy and tax rates, contrasting with previous studies (...) finding significant relations of opposite signs. Data difficulties and weak robustness tests suggest limits to our results. (shrink)
The implications for how teach macroeconomics at the undergraduate level of the emergence of the multidisciplinary study of nonlinear complex dynamics are examined. A definition of complex dynamics is presented and a broad review of various applications in macroeconomics is made. Some particular implications are emphasized such as how complex dynamics raise serious doubts about the rational expectations assumption. Several models and approaches are suggested that can be used to make these ideas accessble to students.
Substantially increased international financial mobility and internal financial reforms in many countries have led to apparently increased volatility of their financial markets. This heightened volatility has sometimes been associated with rapid increases or decreases in asset values that many observers suspect contain elements of speculative bubbles and their associated crashes, not justified by rational expectations of underlying fundamentals. In addition, these possible bubbles may coincide with nonlinear dynamics beyond basic ARCH effects, thus being nonlinear speculative bubbles.