Foundations for Economic Analysis: The Architecture of Socioeconomic Complexity

Abstract

In this work we develop a general theoretical system for economic analysis. We do so by building a model of the economy as an evolving network formed by the behaviour of individuals responding to their socioeconomic environment on the basis of their psychology. We obtain a vision of the structure and function of economic systems, their architecture, which is integrated, holistic and systematic. This vision expands the range of phenomena economics may explain, while incorporating the insights obtained by prior models within its rubric as special cases of a more general theory.Our vision of the determinants of the structure and function of economic systems is drastically expanded. But unlike many past critiques of the of the narrow vision of economics our model not only stresses the importance of psychological and sociological factors but places them in a definite position and relation in the process of behaviour by which socioeconomic systems are formed and evolve. Psychology and sociology are reintegrated wholesale into economics.Arguably the most valuable contribution of this work comes from a more quotidian focus.A peculiar characteristic of this work is that it places equal interest on the positing of an answer to the question of what connections do not form and why so as to what connections do. In so doing the present work provides an explanation for why economic systems are incomplete, some connections are not made. And in fact, this work pushes yet further to demonstrate that the existence of non-substitutability, even its relative ubiquity, may if originating in the satiation of needs cause it to be so that some connections can't be made. Certain economic structures cannot exist without the removal of certain conditions.The incompleteness of economic systems we thus come to appreciate allows them to evolve and our inquiries in this regard lead us to develop an account of the structural evolution of economic systems as yet unobtained within evolutionary economics. We will arrive at a revelation of the process of structural evolution as the transfer of connections facilitated by competition which exploits substitutability where it exists. We obtain a new, formal vantage point on the progression of socioeconomic history. Declaration by author AcknowledgementsIn a few pages I will tell a lie: this work is my own. I wrote it to be sure. I read the material which contributed to it, I developed the mathematics, I derived the theorems, I had the will to keep at it even while the signals from all but one quarter were that it was hopeless. But this is as much the work of John Foster, Peter Earl and Michelle Baddeley as it is my own. More so in fact. A bloated wastrel in form, yet in content a gaunt, wasted shade of the present work would be in the hands of you, the reader, were it not for the counsel of these three great minds. Without Michelle Baddeley, this work does not exist. Period. Without her believing in the strength of my intellect sufficiently to bring me to University College London for four mon...

Prior Commitment and Uncertainty in Complex Economic Systems: Reinstating History in the Core of Economic Analysis

“…Because complex economic systems must exhibit order to function, they are not free to rearrange themselves fully in the face of economic incentives (Markey‐Towler, ). If they could, uncertainty would not be a problem as adaptation would occur in every instant.…”

“…Why? Because all living 9 In this article, the formal structure of a complex, networked economic system will not be discussedthis can be found in Markey-Towler (2017). 10 Much of the following discussion on the role of beliefs is influenced by the research reviewed by Kahneman (2011). systems, including the economic systems created by them, are dissipative structures that, to survive and develop, have to continually import free energy and export entropy.…”

“…(Foster and Metcalfe, 2012). So, all the new kinds of creativity and cooperation that emerge in economic systems, yielding new products and processes, are, ultimately, due to the formation and adoption of beliefs in the imagination (Shackle, 1972;Earl, 1983Earl, , 2003Markey-Towler, 2017).…”

“… In this article, the formal structure of a complex, networked economic system will not be discussed – this can be found in Markey‐Towler (). …”

“… Although the economics of innovation and business strategy literatures are replete with discussions of economic processes at work in history, it has not led to a fundamental revision of the theoretical foundations of economics in the sense of offering a formal representation of economic behaviour that is competitive with conventional economics (Cecere et al ., ; Markey‐Towler, ). …”