Debate the Issues: Complexity and Policy making
The OECD’s New Approaches to Economic Challenges (NAEC) initiative invited experts from inside and outside the Organisation to discuss complexity theory as a means to better understand the interconnected nature of the trends and influences shaping our socio-economic environment. Their contributions, brought together here, examine the assumptions, strengths and shortcomings of traditional models, and propose a way to build new ones that would take into account factors such as psychology, history and culture neglected by these models. The authors concentrate on the discipline of economics as such; the financial system; and applications of complexity theory to policy making and governance. They argue that a new narrative is needed to integrate the hopes, values, attitudes and behaviours of people into economics along with the facts and data economists are more used to dealing with.
Introduction: A complexity approach to economic challenges
The OECD launched its New Approaches to Economic Challenges (NAEC) initiative in 2012 to reflect on the lessons for economic analysis and policy making from the financial crisis and Great Recession. European Central Bank Governor Jean-Claude Trichet said that: “As a policy-maker during the crisis, I found the available models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools”. But even before the crisis Greg Mankiw from Harvard University lamented that “macroeconomic research of the past three decades has had only minor impact on the practical analysis of monetary or fiscal policy”.
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