Time to complicate things

If we stop trying to simplify our economic models, we can improve policy.

According to the increasingly influential school of complexity economics, decisions that at the "micro" level might seem rational, when they become manifest at the "macro" level produce outcomes that are detrimental to all. Several "rights" often combine to produce a "wrong". This can help to explain problems like why there is such an unequal distribution of wealth in many developed economies and why some regions remain depressed for long periods of time.

Neo-classical economics finds it difficult to account for such emergent problems because it is based on a framework of simple, bilateral exchanges between individuals (people and firms). It is forced to regard economy-wide problems as the result of some external disruption to the normal running of free bilateral exchange. As a result, it has failed to develop an adequate theory that makes a connection between individual decisions and developments in the aggregate economy.  

The new fields of complexity theory and network theory help us to understand the economy as a dynamic network, rather than as the static model of bilateral exchange, which underlies orthodox economics. With this new understanding, we can start to develop policy options that might respond more effectively to problems like inequality of wealth.  

Although the school of complexity economics and the idea of emergent phenomena are relatively new, the recognition of system-wide economic problems is clearly not. But, for a long time, most economic thinking has held that many of our fundamental challenges, such as inequality and climate issues, are the result of market failures and can only be solved by using the power of the state to correct any such failures.  

A complexity perspective suggests the state’s top-down bureaucracy cannot, as it currently operates, offer effective and sustainable solutions to emergent economic problems. The state's policy-making incorporates the idea that society acts like a machine that responds automatically to a stimulus (such as a tax cut) in the same way each time, in large part because mainstream economics has taken a very narrow view of human nature and interaction. This has been explored most recently by Paul Ormerod in his book, Positive Linking.

Complexity theory is based on the core observation that social systems are dynamic, evolving networks in which individual and collective behaviour can shift and change rapidly and unexpectedly. The fluidity of this system means attempts to control an economy by gathering data, making forecasts and developing policy will always be subject to a high risk of failure. Mechanistic approaches to policy can be extremely problematic, for at least four broad reasons:  

  1. Idiosyncrasies matter and it is a near impossibility for a centrally determined policy to remain sensitive to local circumstances.
  2. Remotely set targets can be inaccurate proxies for real aims.
  3. Network effects can drown out the very incentives that form the core of most policy responses.
  4. Incentives are often set as if people were selfish maximisers of their own utility - but this is very often untrue.  

The neoclassical approach is comforting in the sense it implies that following simple, easy to devise, mechanical policy rules can solve some problems. But it is misleading because the economy does not work in the way it suggests, which often leads to inappropriate policy ideas. With the complexity approach things are, roughly speaking, the other way around. It suggests policy responses to certain problems will be hard to draw up, and the right answer might be found only after experimentation, simulation, and pilot studies. But the policy formed as a result is more likely to be suited to the policy challenge.  

The new fields of complexity and network theory advocate building up an understanding of the real world from the ground up. In doing so, they paint a picture of the real world that is much more recognisable than the abstractions of neoclassical economics. As such, they have the potential to offer new approaches to seemingly intractable policy problems, and, because these approaches are inherently apolitical, they ought to be of interest to all political parties.

This is an edited extract of a chapter from IPPR’s forthcoming book, Complex New World: translating new economic thinking into public policy. For more see here.

A bifurcation diagram showing a common representation of chaos theory. Photograph: Wikimedia Commons

Adam Lent is the Director of Programmes at the RSA. Greg Fisher is the Managing Director of Synthesis.

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The decline of the north's sporting powerhouse

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Now, things are different.

On a drive between Sheffield and Barnsley, I spotted a striking painting of the Kes poster. Billy Casper’s two-fingered salute covered the wall of a once-popular pub that is now boarded up.

It is almost 50 years since the late Barry Hines wrote A Kestrel for a Knave, the novel that inspired Ken Loach’s 1969 film, and it seems that the defiant, us-against-the-world, stick-it-to-the-man Yorkshireness he commemorated still resonates here. Almost two-thirds of the people of south Yorkshire voted to leave the EU, flicking two fingers up at what they saw as a London-based establishment, detached from life beyond the capital.

But whatever happened to Billy the unlikely lad, and the myriad other northern characters who were once the stars of stage and screen? Like the pitheads that dominated Casper’s tightly knit neighbourhood, they have disappeared from the landscape. The rot set in during the 1980s, when industries were destroyed and communities collapsed, a point eloquently made in Melvyn Bragg’s excellent radio series The Matter of the North.

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Yet today, we rarely get to hear the voices of Barnsley, Sheffield, Doncaster and Rotherham. And the Yorkshire sporting powerhouse is no more – at least, not as we once knew it.

This should be a matter of national concern. The White Rose county is, after all, the home of the world’s oldest registered football club – Sheffield FC, formed in 1857 – and the first English team to win three successive League titles, Huddersfield Town, in the mid-1920s. Hull City are now Yorkshire’s lone representative in the Premier League.

Howard Wilkinson, the manager of Leeds United when they were crowned champions in 1992, the season before the Premier League was founded, lamented the passing of a less money-obsessed era. “My dad worked at Orgreave,” he said, “the scene of Mrs Thatcher’s greatest hour, bless her. You paid for putting an axe through what is a very strong culture of community and joint responsibility.”

The best-known scene in Loach’s film shows a football match in which Mr Sugden, the PE teacher, played by Brian Glover, comically assumes the role of Bobby Charlton. It was played out on the muddy school fields of Barnsley’s run-down Athersley estate. On a visit to his alma mater a few years ago, David Bradley, who played the scrawny 15-year-old Billy, showed me the goalposts that he had swung from as a reluctant goalkeeper. “You can still see the dint in the crossbar,” he said. When I spoke to him recently, Bradley enthused about his lifelong support for Barnsley FC. “But I’ve not been to the ground over the last season and a half,” he said. “I can’t afford it.”

Bradley is not alone. Many long-standing fans have been priced out. Barnsley is only a Championship side, but for their home encounter with Newcastle last October, their fans had to pay £30 for a ticket.

The English game is rooted in the northern, working-class communities that have borne the brunt of austerity over the past six years. The top leagues – like the EU – are perceived to be out of touch and skewed in favour of the moneyed elites.

Bradley, an ardent Remainer, despaired after the Brexit vote. “They did not know what they were doing. But I can understand why. There’s still a lot of neglect, a lot of deprivation in parts of Barnsley. They feel left behind because they have been left behind.”

It is true that there has been a feel-good factor in Yorkshire following the Rio Olympics; if the county were a country, it would have finished 17th in the international medals table. Yet while millions have been invested in “podium-level athletes”, in the team games that are most relevant to the lives of most Yorkshire folk – football, cricket and rugby league – there is a clear division between sport’s elites and its grass roots. While lucrative TV deals have enriched ruling bodies and top clubs, there has been a large decrease in the number of adults playing any sport in the four years since London staged the Games.

According to figures from Sport England, there are now 67,000 fewer people in Yorkshire involved in sport than there were in 2012. In Doncaster, to take a typical post-industrial White Rose town, there has been a 13 per cent drop in participation – compared with a 0.4 per cent decline nationally.

Attendances at rugby league, the region’s “national sport”, are falling. But cricket, in theory, is thriving, with Yorkshire winning the County Championship in 2014 and 2015. Yet Joe Root, the batsman and poster boy for this renaissance, plays far more games for his country than for his county and was rested from Yorkshire’s 2016 title decider against Middlesex.

“Root’s almost not a Yorkshire player nowadays,” said Stuart Rayner, whose book The War of the White Roses chronicles the club’s fortunes between 1968 and 1986. As a fan back then, I frequently watched Geoffrey Boycott and other local stars at Headingley. My favourite was the England bowler Chris Old, a gritty, defiant, unsung anti-hero in the Billy Casper mould.

When Old made his debut, 13 of the 17-strong Yorkshire squad were registered as working-class professionals. Half a century later, three of the five Yorkshiremen selec­ted for the last Ashes series – Root, Jonny Bairstow and Gary Ballance – were privately educated. “The game of cricket now is played in public schools,” Old told me. “Top players are getting huge amounts of money, but the grass-roots game doesn’t seem to have benefited in any way.”

“In ten years’ time you won’t get a Joe Root,” Rayner said. “If you haven’t seen these top Yorkshire cricketers playing in your backyard and you haven’t got Sky, it will be difficult to get the whole cricket bug. So where is the next generation of Roots going to come from?” Or the next generation of Jessica Ennis-Hills? Three years ago, the Sheffield stadium where she trained and first discovered athletics was closed after cuts to local services.

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era