Paul Ormerod at Evonomics: “….The recognition of the fundamental importance of networks for outcomes in the modern social and economic worlds does not mean that governments are powerless. Instead it calls for smarter government rather than no government. It almost certainly means fewer state bureaucrats, working in an outdated intellectual framework, searching for the elusive silver bullet which is guaranteed to solve a problem.
The silver bullet of this approach is that there are no silver bullets. Instead, we need to rely much more on the processes of experimentation and discovery. A key influence on behaviour in many social and economic contexts is the prevailing social norm in the relevant network, which emerges from the interactions of the individuals who comprise the network. But there are no levers, no magic buttons to press, which will guarantee that social norms can be altered in ways which the policymaker desires. We can only discover what works by experiment.
This does not mean that we are operating in the dark, that the success or otherwise of a policy is merely a matter of chance. The more knowledge we have of how people are connected on the relevant network, of who might influence whom and when, the more chance a policy has of succeeding. Much of this knowledge is held at decentralised levels in tacit form, a form which is hard or even impossible to codify. But it is crucial to how most social and economic systems work in practice.
Our current political institutions are to a large extent based on the vision of society and the economy operating like machines, populated by economically rational agents. This view of the world leads to centralised bureaucracies and centralised decision-making. We live in a society where decisions are made through several layers of bureaucracy, in both the public and private sectors. On the whole, this leads to decisions that are insensitive to local (micro) conditions, and which are insensitive to society as it changes.
A lack of both resilience and robustness is a characteristic feature of such approaches to social and economic management. Structures, rules, regulations, incentives are put in place in the belief that a desired outcome can be achieved, that a potential crisis can be predicted and forestalled by such policies. As the recent financial crisis illustrates only too well, this view of the world is ill-suited to creating systems which are resilient when unexpected shocks occur, and which exhibit robustness in their ability to recover from the shock. The focus of policy needs to shift away from prediction and control. We can never predict the unpredictable. Instead, we need systems which exhibit resilience and robustness together with the ability to adapt and respond well to unpredictable future events….(More) Adapted from Complex New World: Translating new economic thinking into public policy, published by the Institute for Public Policy Research (IPPR).