A Science Less Dismal
At a recent family reunion I was locked in yet another fascinating discussion with a certain uncle-by-marriage. We were going back and forth with our typical thought-provoking discourse when all of the sudden he dropped a bomb on me. With a gleam in his eye he said that our economic system was going to collapse, and that he was looking forward to it. What?!?!? My mind immediately sketched out a sketchy future full of soup lines, war, and idealistic Tyler Durdens farming in the streets of Chicago.
I asked him, "Why? Why would you wish for such a thing?" He is an optimist in the long term, but not the short term. He believes that our current economic system is not working except for a very few at the top. There are many who feel as he does.
While I cannot deny that extant systems are superbly suboptimal, I am an optimist in both the long and short term. I agree with Sir James Paul McCartney who said, "You've got to admit it's getting better... It's getting better all the time." Not only are we going to get a better economic system, we're getting a better economics.
I do not study economics (except in the hobby sense), but I do study complex systems. "The Invisible Hand" was the first example of emergence in the literature. Some people treat economics as a tool for predicting human behavior. Others consider economics as the science of resource allocation. As it is, economics is a collection of theories, models, equations, and statistical tools, which appear to be obsessed with equilibria. From the outside, it seems to be another way to address the same problems that complex systems researchers try to address. If these two fields do not in our future combine, they will at the very least collide.
James Wilson is an economist at the University of Maine who studies complex systems. He has published multiple times with Elinor Ostrom , the first woman to with the Nobel Prize for Economics. Both of them were/are very concerned with system resilience and the qualities that correlate with sustainability. He goes even further in his study of complex *adaptive* systems -- systems in which each entity, or "agent," constantly adapts to a changing fitness landscape.
Many of the economists who are connected with policy makers seem to be focused on determining which set of laws will create the right mix of incentives. The unspoken belief is that when they finally get it right, we will all have a thriving economy and will never have to change the laws again. Nobody believes we could ever get it exactly right, but we're all trying to get closer to exactly right. What if there is no such thing as "exactly right?"
The problem with "exactly right," is that it assumes that the actions of agents in a system do not change the system. It also assumes we can all agree on a definition of "right." The first point is wrong because the actions of any given agent can radically alter the payoff matrices for other agents (see Game Theory). The second point is also off because no two economists can agree on which single metric is the one to be maximized. Whenever you call one system "better" than another, it is because it is judged as having a higher score on some metric. Why is the US Economy judged as being "better" than that of Ghana? (I visited once, and love the place) Is it because the US has a higher GDP? higher per capita income? However you judge, you should be aware by what metrics you judge. It will make all the difference.
Some economists are moving toward more holistic metrics such as the "triple bottom line," (coined in 1994 by John Elkington), which measures environmental and societal balance as well as monetary. I get the feeling that something even better is right around the corner. I can feel it lurking at the edge of the woods, just dying to come out into the clearing. Economics is about to change, and so is our economic system first, but it can happen without soup lines or war (extra war, anyway). You heard it here first, ladies and gentlemen. A new, less dismal, economics shall be born. It will be the bastard love child of modern econometrics, game theory, abstract biology, and complex adaptive systems.
The singular metric of the future might best be called "systemic health." This metric simultaneously recognizes the needs of individuals and the robustness of the system serving these same individuals. Finding and defining it will require the work of many. It must be kept out of politics. It must not be voted on. it must be derived from logic and the best of human morality. Surprisingly, it will most likely be entropy-based. Any given economic system could loosely be described as a living system in the Stuart Kauffman sense. Any such system must consume resources which it constantly metabolizes. The system is healthy if:
- 1.it can continually metabolize resources
- 2.while maintaining entropy or trending toward lower entropy
- 3.while trending toward better quality of life for every economic quintile
If any person's actions could change everything for everybody, how do we get there? How do we even begin?
It's a long road, to be sure, but we can begin by constructing multiagent models where each agent is limited in resources, information and communication. For an ideal system with N agents each selecting from M choices, the fitness landscape for each agent is not really a landscape. It's more like (N-1)! MxM payoff matrices. It's ridiculously complicated. This is a job for a computer.
Complex systems often exist in an "far-from-equlibrium" state. Many of these systems never see equilibrium. It is possible that our economies never approach equilibrium. If true, then most of economics is the study of systems that are totally unlike our economies. Equilibrium-based solutions were all we could handle before massively-parallel computing. It's time to take it higher.
We are not bound by equilibrium and we are no longer silo-ed in our separate fields. Our economies are like living systems. They can be vibrant or they can wither. We can, we must develop the tools to change the world.
Herein lies the future of economics (you heard it here first): Develop an economic environment in which selfish zero-sum-game strategies are maladaptive.
Another U. Maine economist, Sarah Morehead , is the author of this idea. It is simple, but sensitive to the complexities of our world. There is so much more to say about this idea. (full disclosure: Sarah is my wife)