The economic meltdown in 2008 has made it essential to change the way we look at economics. But that still has not happened. In this short video Brian Arthur explains the inner workings of the complex system:
When we study economics we are taught that the markets are perfect and correct themselves. But that approach proved to be wrong when Lehman Brothers collapsed. Economists hence had to start looking at how we approach economics in a world that is not orderly. But since neo-liberalism is still the name of the game it’s just a question of when and where the next crash will start. Not least because Trump has de-regulated the financial markets. Maybe his trade war will become the catalyst that leads to another global meltdown.
Events can multiply swiftly
Brian Arthur, as opposed to many economists, don’t believe the world is orderly. According to him, standard economics leave out a lot of issues . Complexity economics consequently looks at the same world from a much broader context that include what’s not perfect and allows the kind of domino effect that happened when Lehman Brothers collapsed.
The belief in economics that everything balances out is wrong. The fact that Germans are well off didn’t spread to the rest of the EU member states. Brian Arthur believes that it’s time to stop looking at the economy as a perfect machine and accept that it’s complex, alive and vital. That will enable us to adjust and re-architect economics which will be beneficial.
Do you agree with Brian Arthur that complexity economics will enable us to make the economy perform better? Would such an approach have enabled us to foresee what would happen when Lehman Brothers collapsed? Would Europe be in better shape today if it had not been presumed that German affluence would spread to the rest of the member states? Is it time for economists to stop presuming that the markets are perfect and will correct themselves? Would you like economics to be re-architectured to take imperfection into account?
Video & Picture: World Economic Forum