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SHIFTING SANDS: NON‐LINEARITY, COMPLEXITY AND RANDOMNESS IN ECONOMICS
Author(s) -
George Donald A. R.
Publication year - 2011
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.2011.00687.x
Subject(s) - rigour , randomness , economics , lease , mainstream economics , mainstream , linearity , neoclassical economics , positive economics , applied economics , mathematical economics , mathematics , political science , law , engineering , statistics , geometry , electrical engineering , finance
The great crash of 2008 and the associated banking crisis have exposed the increasing irrelevance of much mainstream economics and provoked some economists to re‐examine their discipline. Linear or linearized models with well‐behaved additive stochastic disturbances, based on ‘microeconomic foundations’ are no longer anywhere near adequate. Non‐linearity, complexity and randomness cannot be avoided, and the ideas of the British Emergentists have recently been given a new lease of life. Basing economics on algorithmic foundations provides a means of restoring genuine rigour to economics and, it is hoped, allowing the discipline to respond in a rational and humane way the next time a major crisis looms.