America needs bold new thinking about growth and markets rather than simplistic retreads, according to a National Journal article that includes remarks from SFI's W. Brian Arthur.
Read the National Journal article (May 20, 2011)
Mainstream economics needs to embrace the radical notion that people are not rational actors, according to Lord Adair Turner, one of several "new school" economists who spoke at a recent summit in Bretton Woods, N.H.
"New thinkers say they’ve long struggled to break into the policy conversation," the article continues. "Since the late 1980s, researchers at the Santa Fe Institute have worked to bring the idea of complexity back into economics by making use of advanced computing power to map human economic behavior in the same way weather or climate change is tracked. It may sound like science fiction, but it’s the kind of work that might have helped recognize the full magnitude of risk-taking under way during catastrophic housing bubble. Down the road, it could help the Fed recognize 'systemic risks' building up in far-flung corners of the financial system."
Until the financial crisis, the article says, the supercomputing advancements lay dormant. Now, academics are slowly starting to rediscover the Institute’s work. "Policymakers have barely sniffed at it, even though its possibilities are immense. Arthur envisages an open-sourced economic modeling effort to 'stress test' major policy proposals—like Obama’s health care law—and run them through simulations to see how the economy might react and what might go wrong.
Also quoted in the article is MIT's Andrew Lo, who recently presented an SFI Community Lecture in Santa Fe. “The profession [of economics] has reached a cul-de-sac,” says Lo. “Macroeconomists are scrambling to figure out what to do. So politicians are simply pushing whatever kind of economics they can.”