Economics articles, books, and speeches usually end with policy recommendations. You can predict them in advance if you know the ideological bias of the source. Let’s look at three, for comparison.
First, this Brookings Institute piece– What happens if robots take the jobs? The impact of emerging technologies on employment and public policy — written a couple years back by Darrell M. West, vice president and director of Governance Studies and founding director of the Center for Technology Innovation at the Institute.
Second, this piece — Inequality isn’t inevitable. Here’s what we can do differently — published by the World Economic Forum and written last month by a seriously over-achieving 23-year old globe-trotting Italian named Andrea Zorzetto.
Third, this piece — Mark My Words: This Political Event Will be Unlike Anything We’ve Seen in 50 Years — by Porter Stansberry, which showed up in my Facebook feed last month. Stansberry offers this bio: “You may not know me, but nearly 20 years ago, I started a financial research and education business called Stansberry Research. Today we have offices in the U.S., Hong Kong, and Singapore. We serve more than half a million paid customers in virtually every country (172 at last count). We have nearly 500 employees, including dozens of financial analysts, corporate attorneys, accountants, technology experts, former hedge fund managers, and even a medical doctor.”
The Brookings article is what you would expect: long, careful, reasoned. Energetic Mr. Zorzetto’s article is bright, upbeat, and generally impressive. Porter Stansberry’s missive is … well, we’ll just let it speak for itself. I chose these three because they all cite the same economic data and developments, but reach for different policy ideals. There’s plenty more where these came from. Read enough of them, and they start to organize themselves into multiple opinion categories which after numerous iterations all mush together into vague uncertainty.
There’s got to be a better way. Turns out there is: how about if we ask the economy itself what it’s up to? That’s what the emerging field of study called “complexity economics” does. Here’s a short explanation of it, published online by Exploring Economics, an “open source learning platform.” The word “complexity” in this context doesn’t mean “hard to figure out.” It’s a technical term borrowed from a systems theory approach that originated in science, mathematics, and statistics.
Complexity economics bypasses ideological bias and lets the raw data speak for itself. It’s amazing what you hear when you give data a voice — for example, an answer to the question we heard the Queen of England ask a few posts back, which a group of Cambridge economists couldn’t answer (neither could anyone else, for that matter): Why didn’t we see the 2007-2008 Recession coming? The economy had an answer; you just need to know how to listen to it. (More on that coming up.)
What gives data its voice? Ironically, the very job-threatening technological trends we’ve been talking about in the past couple months:
Big Data + Artificial Intelligence + Brute Strength Computer Processing Power
= Complexity Economics
Which means — in a stroke of delicious irony — guess whose jobs are most threatened by this new approach to economics? You guessed it: the jobs currently held by ideologically-based economists making policy recommendations. For them, economics just became “the dismal science” in a whole new way.
Complex systems theory is as close to a Theory of Everything as I’ve seen. No kidding. We’ll be looking at it in more depth, but first… Explaining is one thing, but predicting is another. Policy-making invariably relies on the ability to predict outcomes, but predicting has its own perils, too. We’ll look at those next time.
In the meantime, just for fun…
A click on this image takes you to the original silent movie melodrama series.
A click on this image takes you to a Wikipedia article re: the 1947 Hollywood technicolor remake.
Both of these came out at significant economic times: the first at roughly the middle of six decades of enormous economic growth and quality of life advancements; the second at the beginning of an equally powerful surge of post-WWII economic growth.
Which leads to another economic history book I can’t recommend highly enough. Like Americana — the image below, which I recommended a couple weeks ago — the book is both scholarly and well researched but also highly readable. They’re both big, thick books, but together they offer a fascinating course in the American history we never knew. (Click the images for more.)