Why is Economics not a Complex Systems Science?

Foster, John (2004) Why is Economics not a Complex Systems Science?. Discussion Paper No. 336, School of Economics, The University of Queensland.

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Author Foster, John
Title Why is Economics not a Complex Systems Science?
School, Department or Centre School of Economics
Institution The University of Queensland
Report Number Discussion Paper No. 336
Publication date 2004-12-01
Start page 1
End page 39
Total pages 39
Language eng
Subject 340100 Economic Theory
Abstract/Summary Economics is viewed as a discipline that is mainly concerned with 'simplistic' theorizing, centered upon constrained optimization. As such, it is ahistorical and outcome focused, ie, it does not deal with economic processes. It is argued that all parts of the economy are inhabited by complex adaptive systems operating in complicated historical contexts and that this should be acknowledged at the core of economic analysis. It is explained how economics changes in fundamental ways when such a perspective is adopted, even if the presumption that people will try to optimize subject to constraints is retained. This is illustrated through discussion of how the production function construct has been used to provide an abstract representation of the network structures that exist in complex adaptive systems such as firms. It is argued that this has led to a serious understatement of the importance of rule systems that govern the connections in productive networks. The macroeconomics of John Maynard Keynes is then revisited to provide an example of how some economists in earlier times were able to provide powerful economic analysis that was based on intuitions that we can now classify as belonging to complex systems perspective on the economy. Throughout the paper, the reasons why a complex systems perspective did not develop in the mainstream of economics in the 20th Century, despite the massive popularity of an economist like Keynes, are discussed and this is returned to in the concluding section where the prospect of paradigmatic change occurring in the future is evaluated.
Keyword systems theory
complex systems
economic theory
optimisation
Additional Notes 39 pages ISBN 14465523

Document type: Department Technical Report
Collection: Discussion Papers (School of Economics)
 
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Created: Fri, 28 Jan 2005, 10:00:00 EST by Belinda Weaver (EA) on behalf of School of Economics