Posts Tagged ‘complexity’

I recently stumbled upon a great collection of resources by The Institute for New Economic Thinking.

From INET’s “About” page:

The Institute for New Economic Thinking (INET) was created to broaden and accelerate the development of new economic thinking that can lead to solutions for the great challenges of the 21st century.

The havoc wrought by our recent global financial crisis has vividly demonstrated the deficiencies in our outdated current economic theories, and shown the need for new economic thinking – right now.

INET is supporting this fundamental shift in economic thinking through research funding, community building, and spreading the word about the need for change. We already are a global community of thousands of new economic thinkers, ranging from Nobel Prize winning economists to teachers and students who have emerged out from the shadows of prevailing economic thought, attracted by the promise of a free and open economic discourse.

Having graduated from business school in 2007, just before the monetary/financial/economic crisis really kicked into high gear, I’ve grown increasingly interested in how the economics profession (among other culpable professions/schools of thought) could fail so miserably at seeing what was coming and how it would impact our societies.  Granted, I only studied economics & finance in the context of a general business administration education, but I realized that economic theory was the intellectual bedrock upon which many important theories taught in business school rested.  If the intellectual foundation of economics resembled a castle made of sand, then I figured that, as Jimi Hendrix sang, it would “fall into the sea, eventually.”  Whether or not mainstream economic thinking has fallen into the sea, is open to debate.  But I would argue that organizations like INET, the New Economics Foundation, and others, are a clear indication that there is a growing appetite for a major re-thinking of economics.

Although I just found out about INET, I must say that I’m impressed with the quality of content & thinkers profiled on its website.  I still have more to explore about INET, but the fact that I found recorded interviews and talks by thinkers like Thomas Homer-Dixon, Satyajit Das, and William Rees, makes me confident that there is a wealth of relevant, and leading-edge thought going on in this community.

On that note, I wanted to embed a video of a talk given by one of the major intellectual influences of this blog – Thomas Homer-Dixon.  The talk, given at the 2011 Bretton Woods Conference called Crisis & Renewal: International Political Economy at the Crossroads (link), discusses Homer-Dixon’s recent thinking on complexity theory as it pertains to economics & public policy.

More on Thomas Homer-Dixon:

More on the Institute for New Economic Thinking:

More on other organizations & schools of thinking related to heterodox economics:

  • Institute for Integrated Economic Research (link)
  • New Economics Foundation (link)

I couldn’t really find any background info on the video posted below, but it is one of the best combinations of audio & video about the cosmos & nature of reality that I’ve ever come across.

In the film, the speaker talks about the nature of reality and our ever expanding understanding of it.  Despite how much we seem to know, the speaker makes it clear that actually know very little.

“It’s not that I think I know.  It’s that I know, with absolute certainty, that I don’t.  And I know, with seemingly identical certainty, that nobody knows, because nobody can.”

“Our poets do not write about it; our artists do not try to portray this remarkable thing.  I don’t know why.  Is nobody inspired by our present picture of the universe?  The value of science remains unsung by singers…This is not yet a scientific age.” – Richard P. Feynman

Another fascinating talk by David Korowicz of the Foundation for the Economics of Sustainability (FEASTA):

Embedded below is a great video by David Korowicz of the Foundation for the Economics of Sustainability (FEASTA).

As with many of the resources I share on this blog, the following video explores the pressing concerns of today from the perspective of complex-adaptive systems theory.

Complexity is one of those things that most people “get” (at least intuitively) but about which very few people think systematically.  Instead of trying to comprehend, cope with & adapt to complexity, many people’s response to it is just simply to ignore it or to minimize it.  But, the law of requisite variety says that “if a system is to be stable the number of states of its control mechanism must be greater than or equal to the number of states in the system being controlled (wiki link).” So, for us to properly understand and control our responses to complexity, our mental control systems must be broad enough to be able to handle the massive range of inputs.  In a world of hyper-specialization with subject matter experts, pundits & guru’s, very few of us have a perspective that is transdisciplinary enough to actually understand what’s really going on in the world.

People like David Korowicz of FEASTA, Stoneleigh of The Automatic Earth, Nate Hagens of TheOilDrum & The Institute for Integrated Economic Research, Buzz Holling – the father of resilience theory, or the noted trans-disciplinary thinker Thomas Homer-Dixon – these guys & gals are among a select group of individuals with enough understanding of enough different fields of study to actually have something useful to say about how the future might unfold.  Although the subject matter experts have their purpose, I am of the opinion that in the current environment, anyone who fails to understand complexity and the role that energy plays in sustaining it is not worth listening to for very long.

We live in a complex world.  To deny or ignore this is to severely limits one’s ability to understand and consequently, to make wise decisions.  So, I try to focus on the trans-disciplinary thinkers who make complex-adaptive systems an explicit part of their perspective.

Korowicz is one such thinker.

Additional Resources:

Embedded below is a short clip from a video of a lecture given by Harvard economic historian & theorist Niall Ferguson.  Ferguson discusses many topics which are of interest to this blog – non-linear dynamics and complex systems in the realm of money, finance & economics.

Looking at the economy & financial markets through the lens of evolutionary processes provides valuable insights.  For example, Ferguson references Schumpeter as well as other pioneering thinkers on the intersection of the natural world / evolutionary processes and the monetary/economic/financial worlds.  Those who recognize that markets & economies are complex systems, who also understand what complex systems are and how they work, are really the only people who are even getting close to an approximation of reality.

Ferguson is a pioneering thinker, along with people like Nassim Taleb, Nate Hagens of & the Institute for Integrated Economic Research, Stoneleigh of The Automatic Earth, Noah Raford – PhD Candidate @ MIT, and others that I’m forgetting right now.

Here’s the clip:

Below is a list of the topics Ferguson discusses in his lecture.  (From Full Lecture Available Here):

  1. Introduction
  2. A Darwinian Economy
  3. Underlying Truth
  4. Darwin’s Economic Observation
  5. Biological and Economical Theories
  6. Modern Economics
  7. Markets as Natural Forests
  8. Concentration in Finance
  9. Abuse in the Evolutionary Process
  10. The Evolutionary Analogy
  11. Trends in the Financial Evolution
  12. Biological World vs. Financial World
  13. A Short History of Economic
  14. Inflation vs. Deflation
  15. Arrested Evolution
  16. Conclusion
Description from’s website:

Professor Niall Ferguson offers an evolutionary approach to financial history.  He questions the impeding of natural selection’ by keeping the financial dinosaurs alive through the life support of monetary injections: “without creative destruction, our economic system cannot be a healthy one.”

The view that financial history could be evolutionary’ in fact pre-dates Darwin, born 200 years ago this year, but the view has been pushed into the hinterlands of contemporary thinking about the worlds of finance and economics.  Through the publication of his book, The Ascent of Money, Professor Niall Ferguson brought about a timely re-emergence of the evolutionary approach.

By looking at finance along evolutionary lines, we can relate the long run of financial history to recent events and so illuminate them in a way which will perhaps offer us a clearer sight of how we should pull ourselves out of the current economic crisis.

If I am to be epistemologically honest with myself and with those reading this blog, I can’t ignore the optimists.  Although I’m not entirely convinced by the arguments made by the so-called “optimists”, that’s probably because I’ve mostly been reading the work of the so-called “pessimists” (who of course would call themselves realists).

But therein lies a big problem with the so-called “pessimists” – they often only pay attention to other pessimists.  Which also happens to be  a big problem with the so-called optimists – they often only pay attention to other optimists.  Echo-chambers exist on both sides of the optimism-pessimism continuum.

I think we’d all do ourselves a big favour if we could swallow our pride for a minute, and give a little more time & attention to those with opposing viewpoints. This is not to say that one side isn’t potentially more accurate than the other (otherwise I’d be taking the relativist perspective), but rather to point out that speculations about the future are very often derailed by events that could not be foreseen prior to their occurrence – so-called black-swans (which can be either positive or negative).

And so, in this post, I wanted to share a promo video for a book that appears to make a cogent argument for the “optimists” case.  The Rational Optimist by author Matt Ridley is the name of the book.

I don’t really want to make a lot of remarks about Ridley’s work as I’ve only just come across it and will have to get my hands on his book “The Rational Optimist” before I can really draw any conclusions.   But for right now, I thought the following video was an interesting take on why things today are actually a lot better than they seem when put into historical context.  I’ve focused a lot on the chaos aspects of this blog recently…and so wanted to explore some resources that look at the creative/optimistic side of the spectrum.

Again, I plan on writing a bit more about Ridley after I’ve studied his work in more detail, but my initial hunch is that Ridley under-appreciates the role that energy plays in sustaining socio-economic complexity.  From watching this video, it appears that Ridley believes progress is heavily a function of ever increasing socioeconomic specialization & trade.  But, is it possible that Ridley is just identifying a symptom of progress and not necessarily a cause of it?  Is it possible that specialization, trade, and so on are really just the byproducts of available natural capital (energy, water, climatic, & mineral resources).

My thinking is that it’s the ecological/resource endowments of societies which create the conditions for the possibilities of humans to interact and to create complex societies based on role specialization & trade.  Only after surplus food energy had become ubiquitous enough, did you really start to see complex societies with sectors such as politics, religion, medicine, military, aesthetics, and so on emerge.  Given that these societies were constrained by their solar flow-based energy sources, they never progressed far beyond a relatively low level of socio-economic complexity.  It doesn’t take a genius to recognize that with the discovery & harnessing of fossil fuels came the Industrial Revolution.  More energy = more socio-economic complexity.

I think we often focus too much on anthropocentric factors as the explanation for the success of our species (reason, science, technology, free markets, rule of law, etc.) while focusing too little on the role that environmental & natural conditions play.  This is not to ignore or downplay the incredible capacities that we as humans possess, but rather to point out that we should be humble and give credit where it’s due.

Ma’ Nature hooks us up…big time.  We can’t keep crappin’ on her like we have been or she’s gonna bend us over and have her way with us…

Excellent article by an analyst named Andrew Curry published in the Journal of Futures Studies.  Talks a lot about topics familiar to this blog.