Sunday, July 22, 2012
Beinhocker's book (by Pedja dell'Arno)
Beinhocker's "The Origin of Wealth" is a remarkable book. Its main argument is that Traditional Economics should be and is being replaced by a new paradigm that is gradually taking shape: Complexity Economics. The book narrates a meeting that took place at the Santa Fe Institute in New Mexico between a group of scientists of different disciplines and high level economists, and how some of the scientists were amazed at how the economists had been stuck in a sicentific method of 100 or more years ago, based on a static equilibrium concept derived from the physics of the time. These scientists compared the economists to the Cuban society of today, were people drive cars from the 1950s and they are very skilled at making those very old cars to run. Beinhocker argues that economics should treat the economy as an open dynamic system that is not necessarily in equilbrium and use scientific tools that are common in other disciplines. It is not at all about rejecting the use of mathematical techniques in economics, as too often one sees in other critiques of modern economics, but it is about using new and perhaps more sophisticated mathematical tools. The weakest part of the book is the attempt by the author to portrait the social and political implications of the new paradigm as overcoming the "old divide" between left and right. In fact, the details of these implications are a severe blow, one more, to the view that markets self-regulate and reach optimal allocations that make governments unnecessary. But perhaps to publish with a good company you need to say that left and right equally make no sense.