How did this marvel of self-organized complexity evolve? How is wealth created within this system? And how can wealth be increased for the benefit of individuals, businesses, and society? Beinhocker argues that modern science provides a radical perspective on these age-old questions, with far-reaching implications. According to Beinhocker, wealth creation is the product of a simple but profoundly powerful evolutionary formula: differentiate, select, and amplify. In this view, the economy is a "complex adaptive system" in which physical technologies, social technologies, and business designs continuously interact to create novel products, new ideas, and increasing wealth.

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Jan 29, Katia N rated it really liked it This is entertaining, intellectually stimulating and well researched book about complexity economics. If you are interested in the alternative views on economic theory, you would find it worth paying attention to. It is written in , but still stands alone as a popular introduction into this field. I am surprised it has not been updated and there is nothing more recent on the topic. The book is more than pages, but I never felt bored.

There is a part where Mr Beinhocker is trying to This is entertaining, intellectually stimulating and well researched book about complexity economics. There is a part where Mr Beinhocker is trying to formulate his own theory of economic growth borrowing from the theory of evolution and applying it to the economy.

These chapters and his theory, respectively, I found not very convincing and relatively sketchy. And he admits himself that he might be wrong in certain conjestures. However, the effort to produce any theory within the complexity framework was worthwhile nevertheless. The rest of the book is a delight. He gathers the relevant knowledge from the scientists working in the complexity field and convincingly presents it. He also explains why the traditional neoclassical theory does not quite work.

Below is what he is considering in the book: - the economy is complex adaptive system Complex - contains many agents interacting with each other and demonstrates the phenomena of emergence; adaptive - the agents adapt their behaviour in response to certain feedbacks; There is no long-lasting equilibrium within these systems.

The system is also dynamic evolving with time. The implications of this are massive of course. He demonstrates it with lots of example and the related models. I will just mention the two of them here, the ones I found quite striking: Sugarscape model: The model has been developed in by J Epstein and R Axtell.

It is a computer simulation of economic interactions between the agents trying to obtain and eat sugar the only resource available which is spread unevenly within limited landscape. In the simplest model the agents could do only 3 things: look for sugar; move; eat sugar. So, the one with better vision and slower metabolism would be genetically better off, but the geography where are they would matter as well.

For starters, they ran this game with agents. As time passes, however, this distribution has changed dramatically. Beinocker describes the outcomes and the assumptions in a very clear and detailed way. However, even the basic model is very revealing. Any policy-maker should be familiar with this if she is serious addressing the inequality issues. Stock market According to Beinocker, the stock market is the only place where the economic theories are tested almost in real time and where there is a massive amount of empirical data.

The book has been written before the latest financial crisis. However, when I read this book, I was amazed that all the knowledge describing the inherent instability of the stock market were already there! It seems, just no-one wanted to open their eyes and look.

And i am not even talking about the financial system as whole. Just pure stock market. The prices follow totally random walk; - the market will reach its equilibrium; - the price reflects the fair value of the company All of it leads to the following conclusions: -that the bubbles are impossible only might be coursed by exogenous factors, not inherent in the system ; - no big money can be made at stock exchange - ha!

And it was evident in already that this theory is total rubbish excuse my French! Beinocker shows how and why it is the case through the models of David Farmer, the physicist, turned into a stock broker and then finance theorist. He argues that no single broker would have sufficient liquid funds easily available. But i think, it was more a self-delusion, than the conclusions from his own research.

It is evident now that the share price does not reflect the company value and respectively, the management does not have a direct control over it. These are just two examples how complexity approach and the related modelling is changing the traditional economic paradigm.

In the last part of the book, Beinocker considers possible policy implications of the complexity economics. Specifically thinks about inequality, development and the role of the government in the economy. He hopes that the theory would put an end to the traditional left and right divide on the economic issues. I would like to hope together with him… However, it seems we are moving backwards not forwards in terms of the divergence between the theory and practice… All of this might sound very dry to you, but the book is not dry.

He is fantastic and patient storyteller. He takes time explaining the concepts and models. I have to make a warning though, if you are easily irritated by the management consulting verbiage, you might find bits of this book quite annoying.

But it is not intolerable and not everywhere the majority is focused in Chapter 14 which might be easily skipped. Definitely, complexity economics is the one of the most promising ways of looking at the economy.

Complexity and convergence seem to be the trends developing in the natural sciences for quite sometime. I am glad it is starting to reach the social sciences as well.


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