OECD Insights

English
ISSN: 
1993-6753 (online)
ISSN: 
1993-6745 (print)
http://dx.doi.org/10.1787/19936753
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OECD Insights are a series of reader-friendly books that use OECD analysis and data to introduce some of today’s most pressing social and economic issues. They are written for the non-specialist reader, including interested laypeople, older high-school students and university freshmen. The books use straightforward language, avoid technical terms, and illustrate theory with real-world examples. They also feature statistics drawn from the OECD’s unique collection of internationally comparable data. Online, you can find a number of special features to enhance each book’s educational potential.

Also available in French, German, Spanish
 
Debate the Issues: Complexity and Policy making

Debate the Issues: Complexity and Policy making You or your institution have access to this content

English
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    http://oecd.metastore.ingenta.com/content/0117031e.pdf
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Author(s):
Edited By:Patrick Love, Julia Stockdale-Otárola
06 June 2017
Pages:
104
ISBN:
9789264271531 (PDF) ; 9789264271586 (EPUB) ;9789264271524(print)
http://dx.doi.org/10.1787/9789264271531-en

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The OECD’s New Approaches to Economic Challenges 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.

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  • Foreword

    The OECD has prided itself on its essential role in reconciling the economy with nature and society. At present, the global community is failing to fully grasp and advance this fundamental agenda. To do so we need to improve our analytical frameworks, policy tools and models.

  • 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”.

  • Complexity and policy making

    The crisis exposed some serious flaws in our economic thinking. It has highlighted the need to look at economic policy with more critical, fresh approaches. It has also revealed the limitations of existing tools for structural analysis in factoring in key linkages, feedbacks and trade-offs – for example between growth, inequality and the environment.

  • Complexity and economics

    Over the last two centuries there has been a growing acceptance of social and political liberalism as the desirable basis for societal organisation. Economic theory has tried to accommodate itself to that position and has developed increasingly sophisticated models to justify the contention that individuals left to their own devices will self-organise into a socially desirable state. However, in so doing, it has led us to a view of the economic system that is at odds with what has been happening in many other disciplines.

  • Complexity and the financial system

    Global finance is the perfect example of a complex system, consisting as it does of a highly interconnected system of subsystems featuring tipping points, emergence, asymmetries, unintended consequences, a “parts-within-parts” structure (to quote Herbert Simon), and all the other defining characteristics of complexity. It is shaped by numerous internal and external trends and shocks that it also influences and generates in turn. And as the system (in most parts) also reacts to predictions about it, it can be called a “level two” chaotic system (as described, e.g. by Yuval Harari)

  • Applications of complexity theory

    The city is humanity’s greatest invention. An artificial ecosystem that enables millions of people to live in close proximity and to collaborate in the creation of new forms of value. While cities were invented many millennia ago, their economic importance has increased dramatically since the Industrial Revolution until they now account for the major fraction of the global economy. All human life is there and so the study of cities crosses boundaries among economics, finance, engineering, ecology, sociology, anthropology, and, well, almost all forms of knowledge. Yet, while we have great knowledge in each of these domains individually, we have little scientific knowledge of how they come together in the overall system of systems that is a city. In brief: How does a city work?

  • Towards a new narrative

    The September 2016 Workshop on Complexity and Policy organised by the OECD New Approaches to Economic Challenges (NAEC) team along with the European Commission and the Institute for New Economic Thinking (INET) included a discussion about how you build a narrative around complexity. As one participant pointed out, “complexity economics” isn’t the most thrilling of titles, except (maybe) to complexity economists. But “narrative” was one of the keywords of the discussions, along with “navigating” complexity. If you add to this Lex Hoogduin’s plea for modesty in his article on Insights and during the debate, I think we could learn something from an expert on narrative, navigation, and modesty: Homer.

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