Eric D. Beinhocker

I already mentioned some of the thoughts of this book here when I started it. Though it is pretty long, it was a rewarding read and I came back after a break from it to finish it.

Beinhocker claims (and who would argue with him about it) that economics as we have it develops models that seldom relate to reality and leads to false predictions, false hopes and false politics. He argues for a new kind of economics, which he calls "Complexity Economics", in which it is acknowlegded that the human economy is one of the most complex systems imaginable and in a constant state of unrest (as opposed to the equillibrium view of traditional economics). He puts his case forward on the shoulders of many advancements in science: physics, psychology, sociology, computer science and systems research (of course, there have also been some economists who understood the problem).

The books proceeds in four parts:

  • Beinhocker first explains how, when and by who the traditional economic models were first developed.
  • He then explains several concepts which have been on the radar of other sciences in the last decades (and that, he is convinced, all show how the traditional models of economics is flawed): dynamics, agents, networks, emergence, evolution and cooperation. This part didn't contain too much new things for me, but was written well, I must say.
  • Then, he goes on to define several design spaces that a new science, Complexity Economics, could make use of to formalise things. He says we should think about Physical Technologies, Social Technologies and Business Plans as three distinct ingredients. Then, Business Plans would make a good unit to be put under a selection pressure in an economic sense. Furthermore, the conditions of what constitutes economic activity should be discussed. In the new light of complexity, he proposes as a starting point that every activity should be irreversible and entropy-lowering in order to be counted as an economic activity.
  • In the end, Beinhocker lines out what the effects of such a new way of looking at our main activities could have on several parts of our doings. How businesses develop their strategies should evolve to a more adaptive mind-set. The structure of organisations should be affected on all levels and be less rigid in order to tap more of the brainpower of employees. This way, he claims, a company could have the advantage to emerge better abilities to tackle complexity and enable endurance and growth (though this claim is not made very clear). Maybe we could even come to smarte financial indices than we have today. Lastly, politics could finally set their left-right divide aside, as Complexitiy Economics wouldn't be "owned" by any side.

It is always interesting to see when someone tries to put pieces together. Then, of course, he mixes facts with wishful thinking and it can be hard to set those apart. Then again, this book is meant to provoke discussion and in addition, he cites a lot of serious research so it's not just him talking. Actually, he cites some really interesting papers, some of which I had a closer look on.

Let's close with Beinhockers first sentences in the book:

"As I write this, the field of economics is going through its most profound change in over a hundred years. (...) I also believe that just as biology became a true science in the twentieth century, so too will economics come into its own as a science in the twenty-first century."

We'll see about that but I hope he's right.

# lastedited 22 Dec 2010
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