Complexity Economics

The classical macroeconomics is permeated by the idea: rational actors work in a world of equilibria. In this world of thought, it is only logical that bubbles are not accidents but cycles - or fluctuations.

And there's no doubt, it has often helped us to take the simplified view of economics being a "machine".

But if we are looking for an adequate politics that responds to new challenges, we need to draw a more realistic picture of the economy.

The complexity economics develops evolutionary - not solely on the basis of computational knowledge, but by tinkering, experimenting, discovering, discarding, remixing...

Game Changing

In this view, markets are "played".

If the same alwys win, the game becomes boring before the game rules are changed 

And that feeds my totally immodest idea to outline a politics that is not based on existing idols.

What does all this mean?

If markets are saturated of chocolate, they turn to, say, nuts and selling more chocolate becomes too expensive. This opinion is still widely used. Income per unit declines with increasing market saturation describes this theory in short.

But, markets may get info about an excellent quality of cocoa beans at the "foggy southern slopes of certain mountains of Venezuela". Luxury vintage chocolate is made of them. These new brands in the high-price segment meet an already developed market and the margins increase along the saturation. Vintage chocolate that gains market share find it easier to get more market share.

The theory of increasing returns

Here you'll find everything about the theory:  Brian Arthur's papers and books. He's the originator of the theory.

The theory of increasing return applies in many sectors or even regions, but it's central in the "high-tech" economy. These products have differentiating principles. They provide frameworks and platforms to build innovations atop. Often they are solutions and development systems in one. Innovations of a type discussed here...

The monopolist is no longer the classic salt monopolist. Working in the "data salt mines" is difficult, but promising. Data  owners….can define rules, plan moves and design game arrangements for increasing returns

"Complexity" is a key principle of differentiation.

Soon, I'll look into the complexity of work.

Picture from Sehfelder