Author Archive
WINIR Conference 2016 in Boston
| Dick Langlois |
Proposal submission will close soon for the third annual WINIR conference, which will take place this September 2-5 at the Seaport Boston Hotel. The first two conferences — in London and then in Rio — were great events, and this year should prove equally exciting. Plenary speakers are Daron Acemoglu (MIT, economics), John L. Campbell (Dartmouth, sociology), Margaret Gilbert (UC Irvine, philosophy), Henry Hansmann (Yale, law), and Wendy Wood (USC, psychology). Submit your abstract now.
Dynamic Competition
| Dick Langlois |
I was recently asked by a staffer of the UK House of Lords to contribute written testimony on an inquiry into “online platforms and the EU Digital Single Market.” They wanted to hear about the concept of dynamic competition, and they gave me a set of questions, which I answered in a rather abstract way. The testimony has now been published on Parliament’s website.
Patents for Institutional Innovation
| Dick Langlois |
I was fascinated to learn about the recent ballot proposal in Ohio to legalize marijuana by constitutional amendment. The unusual aspect of the proposal was that it would have come with a grant of a monopoly in commercial marijuana production to specific investors who owned suitable land. Because they stood to gain considerably from passing the proposal, these investors devoted resources to getting it passed, including professional canvassers, political strategists, and even a mascot with a head shaped like a marijuana bud. Basic Public Choice teaches that legislation benefiting many diffuse constituents is hard to pass because of transaction costs. In effect, the monopoly aspect of the Ohio proposal would have granted a patent to the investors, thus giving them the incentive to overcome the transaction costs of collective action. The proposal failed, and at the same time Ohio voters passed an amendment forbidding the use of ballot initiatives for personal gain. It is interesting nonetheless to think about the economics of such “patents” for institutional innovation.
The Internet as Collective Invention
| Dick Langlois |
Further to Peter’s post on government science funding: I just received, hot off the (physical) press, a copy of Shane Greenstein’s new book How the Internet Became Commercial (Princeton, 2015). Among the myths that Greenstein — now apparently at Harvard Business School — debunks is the idea that the internet was in any sense a product of government industrial policy. Although government had many varied and uncoordinated influences on the development of the technology, the emergence of the Internet was ultimately an example of what the economic historian Robert Allen called collective invention. It was very much a spontaneous process. And it was not fundamentally different from other episodes of technological change in history.
Nathan Rosenberg (1927-2015)
| Dick Langlois |
I just learned that Nathan Rosenberg has passed away at 87. Nate was unarguably one of the most important economic historians and students of technological change of our era. He was also a one of the most important influences on my work.
I still regret that, out of ignorance, I didn’t take full advantage of all the resources available to me when I was a graduate student at Stanford. But Nate was a partial exception. I sat in on his course on history of economic thought; and when it came time to choose a thesis committee, he was kind enough to agree to be a member. I remember having a number of long conversations with him in his office in Encina Hall, although his greatest influence on me was through his writings. Nate had an eye for looking into — and theorizing about in a non-formal way — the micro structure of technology and innovation. I have always thought that his early work with Ed Ames is wonderful and greatly underappreciated. His work on the machine-tool industry in the United States is a progenitor of the economics of general-purpose technologies and one of the beginnings of what I like to think of as the Stanford School of technology-focused economic history.
I think Nate’s influence shows through on the range of my own work, including that with Paul Robertson. (It turns out that Nate was an associate advisor on Paul’s dissertation committee at Wisconsin before he was a member of mine at Stanford.) I was also fortunate to become part of the invisible college of technology economics of which Nate (along with Dick Nelson and others) was a dean, and I was fortunate to collaborate with other fellow Rosenberg students like David Mowery and Ed Steinmueller on policy-focused industry histories, another Rosenberg specialty.
M is for Multidivisional Structure
| Dick Langlois |
As a student of Alfred Chandler, I was excited to see Google’s conversion into Alphabet – which is essentially a multidivisional conglomerate. Chandler chronicled the development of the M-Form structure in the days of the Second Industrial Revolution, beginning with DuPont, and it remains an interesting question whether the same pattern will eventually take shape among the dominant firms of the Third Industrial Revolution.
Generally speaking, a move to the M-Form reflects a maturing of a technology and an industry, when information flows and incentives within a specialized unit – a module, if you wish – become more important than widespread and more flexible information flows within a functional organization. The more radically innovative the company, the more important these widespread information flows. Apple is organized in a functional form, and Microsoft famously returned to a functional form after a few years as an M-Form precisely in order to become more radically innovative in the face of declining revenues from Windows. Of course, Google remains as a functional entity within the Alphabet conglomerate, and the technologies in Alphabet’s other divisions are arguably less related to one another than in, say, the divisions into which Microsoft was once divided. Moreover, Alphabet will keep the two-tiered structure of stockholding that gives considerable power to the three founders, which makes Alphabet less like a vanilla conglomerate and more like the kind of widely diversified pyramidal holding company common around the world but essentially illegal in the United States.
The Myth of the Patent Anti-Commmons
| Dick Langlois |
Just ran across the abstract of a fascinating paper called “The Anti-Commons Revisited” by Jonathan Barnett at USC, which is forthcoming in the Harvard Journal of Law and Technology. Here’s the abstract.
Intellectual property scholars and policymakers often assert that technology and creative markets suffer from “anti-commons” (“AC”) effects that restrain innovation within a web of conflicting intellectual property claims. A minority view asserts that market players have incentives and capacities to correct for AC effects through transactional solutions. To assess the relative merits of each side of this debate, I review a large and diverse body of empirical evidence relating to AC effects in contemporary and historical markets. I independently replicate the most controversial empirical findings, supplement additional research on selected markets, and provide a survey of all documented IP-pooling arrangements in U.S. markets since 1900. The weight of the evidence strongly favors the minority view. Evidence for AC effects is scarce while evidence that markets correct for AC effects is abundant. AC effects are typically preempted or mitigated through cooperative arrangements among small numbers of IP holders or transactional solutions devised by entrepreneurial intermediaries for large numbers of IP holders. This pattern recurs over a diverse array of markets and periods, including automobiles, petroleum refining, aircraft, and radio communications in the early to mid-20th century, and information and communications technology markets from the late 20th century through the present. Contrary to standard assumptions, there is little evidence that these markets experienced reduced or delayed innovation or output despite intensive levels of patent issuance and litigation.
Masahiko Aoki
| Dick Langlois |
I was saddened to learn that Masa Aoki passed away on July 15. He was only 77. Masa was a towering figure in the economics of institutions and organizations, and a true gentleman.
ICC Special Issue on Steve Klepper
| Dick Langlois |
The new issue of Industrial and Corporate Change is a special issue devoted to the legacy of Steve Klepper, who died a couple of years ago at age 64. The editors provide a good survey of Steve’s work, and there are a number of interesting papers in the issue, including one by David Mowery comparing Klepper with Alfred Chandler.
Capabilities, Transaction Costs, and Buzz Lightyear
| Dick Langlois |
I joked in a comment on Peter’s last post about naming classes of articles after fairy-tale (or is it Disney?) characters. Is there a Disney moniker for a work that keeps getting reinvented? As I get older, I think about this more often, and I’m probably entering the dread legacy-protection phase of my career.
This came to mind because I happened upon an interesting paper from Nick Argyres and Todd Zenger, which has been out for a while but which I hadn’t seen. The authors propose to synthesize capabilities theory and transaction-cost economics. A worthy goal. Except that Paul Robertson and I did this twenty years ago. Argyres and Zenger point out, as Paul and I did, that neither capabilities alone nor transaction-costs alone can explain the boundaries of the firm. They settle on an account in which firms integrate because of strong complementarities among assets that create hold-up problems if accessed through markets. Their example is Disney’s relationship with and eventual acquisition of Pixar. (I know! A work that gets constantly reinvented is a Buzz Lightyear!) Far from being a general theory of capabilities and transaction costs, however, this is a special case of the general theory Paul and I proposed. We talked specifically about this kind of case (see especially pp. 38-40), which we called the appropriability variant of our account, associated with Teece (1986), to distinguish it from the entrepreneurial variant. In the entrepreneurial variant, firms integrate into complementary activities because of the dynamic transaction costs of using markets. Argyres and Zenger cite my 1992 ICC paper on dynamic transaction costs, but they make it out to be a claim that capabilities alone can explain vertical integration, which is of course the opposite of what the article actually says. They offer the gnomic remark that my definition of dynamic transaction costs “mirrors that of Williamsonian transaction costs.” But isn’t that the point? They really are transaction costs, and you can’t explain vertical integration without transaction costs. I’m sure there are a lot cases like Pixar out there, and I have certainly never denied that hold-up threats are sometimes a cause of vertical integration. But as I learn more about the history of vertical integration as part of the Corporation and the Twentieth Century manuscript I’m now working on, dynamic transaction costs are on the whole much more important than hold-up threats. (Also extremely important is government policy, which is really the point of this new project.) I’m sorry this sounds a bit negative, since the Argyres and Zenger paper really is a terrific article that is right-headed and develops the appropriability variant in much more depth than Paul and I did in our quick sketch.
Another paper that reinvented (and significantly extended) Langlois and Robertson (1995) is Jacobides and Winter (2005). Of course, I can’t very well criticize Sid Winter, since the whole idea of dynamic transaction costs came out of my effort in the 80s and 90s to apply Nelson and Winter (as well as Coase) to the problem of the boundaries of the firm, something that Nelson and Winter themselves had not then gotten around to.
The Medieval Enlightenment in Economic Thought
| Dick Langlois |
Attending academic presentations as a spectator – a pure consumer – can be great fun. On November 20, I drove up to Boston for one day of a wonderful conference, put together by the Business History program at Harvard Business School, on the History of Law and Business Enterprise (which probably merited its own separate blog post). This is an area that I am starting to get interested in. The conference was in many ways a showcase for the GHLR perspective on the history of corporate organization – the acronym referring to the work of Timothy Guinnane, Naomi Lamoreaux, Ron Harris, and Jean-Laurent Rosenthal, all of whom were there. The conference took place across the street from Harvard Stadium on the weekend of the Harvard-Yale game. Harvard won the football game (alas), but the conference was a Yale rout.
And last week I attended a presentation here at UConn that was even more vicarious fun. Our Humanities Institute invited Joel Kaye from Barnard to talk about his new book, A History of Balance, 1250-1375: The Emergence of a New Model of Equilibrium and Its Impact on Thought, which has just appeared from Cambridge. I was the token economist in the audience, even though two of his chapters are about economics. His argument is that medieval scholastic thought changed radically over this period, and produced by its end a different and arguably more sophisticated model of how the economic world works. This “new” model is not the standard Aristotelian version we are normally told about but was in fact something far closer to the views of the Scottish Enlightenment. (Needless to say, his telling of this was far more nuanced.) In addition to Nicole Oresme, whom I had heard of, he relies heavily on the work of Peter John Olivi, an earlier Franciscan theologian, whom I had never heard of. In Kaye’s telling, Olivi came close to something like the idea of the invisible hand. I took a quick look at standard history-of-thought texts, and nobody mentions Olivi at all – except Murray Rothbard, who credits him with discovering the subjective theory of value.
This is really a story about the Enlightenment of the High Middle Ages, which took place among academic clerics in an age of population growth, (extensive) economic growth, and urbanization. As Kaye apparently argues in an earlier book, these academics were constantly confronted with the market – especially in the thriving city of Paris – and were well versed in market practice; indeed, this knowledge of the market and money contributed to advances in physical and biological as well as social sciences. The medieval academic Enlightenment went into decline after the Black Death in the early fourteenth century. The resulting dislocations and the swing in relative prices – in favor of peasants and against landholders, including importantly the Church – reduced the centrality and authority of academic thought, even as they spurred institutional changes that would set the stage for growth in the early modern period. Population in Europe did not return to its pre-plague levels until the sixteenth or seventeenth century, and economic thought took just as long to recover. (I know this is whiggish, but I can’t help it.)
There was perhaps one connection between the two events. At HBS, Ron Harris talked about his ongoing research on the earliest history of the corporate form in the East and the West. Here the commenda contract is the centerpiece. That is presumably what schoolmen like Olivi called by the Latin term societas, which was not, however, the same institution as the societas publicanus of ancient Rome.
The WINIR Greenwich Conference
| Dick Langlois |
I write on the flight back from the inaugural conference of the World Interdisciplinary Network for Institutional Research (WINIR), which met on the Prime Meridian these last few days. The conference was a great success, not only for its wonderful location in the Old Royal Naval College astride the Cutty Sark but also for the overall quality of the organization and the presentations.
As I have mentioned before, WINIR was created to encourage institutional research from a wide range of perspectives and disciplines. The annual conference institutionalizes this (you might say) by having keynote speakers from five different disciplines. The political scientist was Kathleen Thelen from MIT, one of my fellow editors on the Journal of Institutional Economics; the legal scholar was Katharina Pistor from Columbia; and the sociologist was Geoffrey Ingham from Cambridge, who made some interesting observations about Chinese institutions in the context of the “great divergence” debate in economic history. Serious and well-known scholars all. The economist was Timur Kuran, who updated us on his fascinating work on the economics of the pre-nineteenth-century Islamic waqf. But the most interesting – or at any rate most surprising – keynote was the philosopher Barry Smith from Buffalo, whom some of you may have heard of for his early work on the philosophy of Austrian economics. Smith’s talk was about “ontology,” which in my ignorance I had expected to be an hour of head-breaking essentialism. It turns out that “ontology” now means the practice of classification – giving things the right names and putting them in the right boxes. As much computer science as philosophy, it seemed to me. The main applications are in databases and sciences more generally, including things like Department of Defense databases and Human Genome data. Smith is a world-leading practitioner of this kind of ontology, having founded something called the National Center for Ontological Research. (I must confess that the first thing that popped into my mind when I heard this title was the High-Energy Magic Building at Terry Pratchett’s Unseen University.) Basically, ontology appears to be about modularization and standardization, something quite fitting to talk about in the shadow of the Royal Greenwich Observatory. I discovered that Smith was unaware of the modularity literature, so I plan to send him some references.
Many of the parallel sessions were also of high quality. I could attend only a fraction of them (what with sneaking out to visit the longitude exhibit at the National Maritime Museum). But let me plug a couple of papers by my friends. Giampaolo Garzarelli and Lyndal Keeton modeled “internal exit” in pre-colonial Southern Africa, the fissioning off of subtribal groups to found new polities. (I was impressed with the quality of that entire session.) As I was chairing a competing session later, I missed Roger Koppl and Caryn Devin talking about their paper “Against Design,” written with Stuart Kauffman and Teppo Felin. A version of that collaboration will appear in JOIE as a target article with solicited comments. (more…)
The Piketty Code
| Dick Langlois |
I was trying to avoid jumping into the fray about Capital in the Twenty-First Century so as not to participate in the mania, as if throwing one more tiny ember into a wildfire would cause measurable additional damage. But I couldn’t resist after seeing an article entitled “How Thomas Piketty Explains American Sports.” Written by someone called Kevin Lincoln in a left-wing mag called Pacific Standard, the article discusses the NBA’s proposal to raise the minimum roster age from 19 to 20, thus reducing the number of one-and-done college players and depriving John Calipari of his livelihood. (Did I forget to mention that UConn won both men’s and women’s national championships this year?) Lincoln correctly points out that such a change is in the interest not only of the D-1 colleges, who get to keep their stars longer, but also of the NBA, since it offloads more player development to the colleges. Sounds perfectly reasonable – exactly the kind of analysis you would expect from, say, a free-market public-choice economist. What on earth does this have to do with Piketty?
The concept of “over-accumulation” was coined by economist David Hershey, and with the ascent of Thomas Piketty’s Capital in the Twenty-First Century into bestsellerdom, it’s something that anyone with even a passing interest in economics is probably familiar with. In our current economy, actors who have gathered large amounts of capital tend to invest it in the creation of further capital for themselves rather than funneling it back into production. In turn, the economy stagnates, with the world’s financial resources concentrating in the hands of the rich with no money left over to raise wages for the working class.
Yes, this scheme will probably raise the wealth (a little) of NBA owners. But it doesn’t have anything to do with the accumulation of capital. For both owners and players, the NBA is all about people getting wealthy from entrepreneurial insight and scarce valuable skills — exactly contrary to Piketty’s predictions.
The author is obviously economically illiterate — how exactly can people “create further capital for themselves” without somehow “funneling it back into production”? Yet the fact that someone smart enough to write a free-lance article would connect the NBA to Piketty speaks, it seems to me, to what the Piketty phenomenon is all about. In my view, we should not be comparing Piketty with Marx or Keynes. We should be comparing him with Dan Brown. Like the Da Vinci Code, Capital is an otherwise unremarkable book that managed to put together a volatile mix of elements. Both books captured some kind of zeitgeist, of course, but they did so in a remarkably precise way. They rely on similar elements: a theory of how the world works that doesn’t stand up to minimal scrutiny but is easy to understand, seems to explain the mysterious and ineffable, and, most importantly, confirms the gut prejudices of its readers. Capital is not as much a conspiracy theory as the Da Vinci Code; it’s a nineteenth-century story about aggregate income shares. But it is also an empty-enough vessel into which readers (especially those who haven’t actually read it) can pour their own conspiracy theories. The NBA is the Opus Dei of capitalist sports.
While we’re on the subject, I also want to mention that, to my mild surprise, the best review of Piketty I have run across is by Larry Summers. He gathers together all the technical criticisms in many other reviews and then adds a few of his own. While he pats Piketty on the back for his wonderful interest in inequality, he leaves the theoretical claims in a tattered pile on the floor.
Spender on Strategy
| Dick Langlois |
The always-interesting J.-C. Spender has kindly sent me a copy of his new book from Oxford, Business Strategy: Managing Uncertainty, Opportunity, and Enterprise. Not surprisingly, this very much the kind of book readers of this blog will find interesting. In addition to covering (and interpreting) standard practitioner and academic models of strategy, the book spends considerable time on language, persuasion, and rhetoric. Those of you who teach strategy should definitely have a look.
Epistemic Mind Games
| Dick Langlois |
I had a brief mental hiccup today when I received an email advertisement from Stanford University Press for a book called Epinets: The Epistemic Structure and Dynamics of Social Networks by Mihnea C. Moldoveanu and Joel A. C. Baum. Because the ad carried prominently the SUP logo — a stylized fir tree — and because epinette is the Canadian French word for spruce tree, I thought for a nanosecond that I was being offered a treatise on conifer biology, penned by a man whose name means “tree.” But no. It’s a book of organizational sociology. “Drawing on artificial intelligence, the philosophy of language, and epistemic game theory, Moldoveanu and Baum formulate a lexicon and array of conceptual tools that enable readers to explain, predict, and shape the fabric and behavior of social networks.” Might be worth glancing at, if only to find out what epistemic game theory is. (Perhaps it is as opposed to ontological game theory.)
Of course, the Palo Alto of the Stanford seal is not a spruce. It’s a coast redwood, also called a sequoia.
WINIR Conference in Greenwich: Deadline Approaching
| Dick Langlois |
February 28 is the deadline for submitting an abstract to the first conference of the World Interdisciplinary Network for Institutional Research (WINIR), which will take place 11-14 September 2014 at the Old Royal Naval College, Greenwich. Keynote speakers include Timur Kuran. Information and abstract submission at the WINIR website.
Cheating and Public Service
| Dick Langlois |
Everyone knows that people who want to go into government jobs have high pro-social preferences and impeccable honesty. Well, not so in India, according to Rema Hanna from the Kennedy School at Harvard, who spoke in our department seminar series Friday. Here is the abstract:
In this paper, we demonstrate that university students who cheat on a simple task in a laboratory setting are more likely to state a preference for entering public service. Importantly, we also show that cheating on this task is predictive of corrupt behavior by real government workers, implying that this measure captures a meaningful propensity towards corruption. Students who demonstrate lower levels of prosocial preferences in the laboratory games are also more likely to prefer to enter the government, while outcomes on explicit, two-player games to measure cheating and attitudinal measures of corruption do not systematically predict job preferences. We find that a screening process that chooses the highest ability applicants would not alter the average propensity for corruption among the applicant pool. Our findings imply that differential selection into government may contribute, in part, to corruption. They also emphasize that screening characteristics other than ability may be useful in reducing corruption, but caution that more explicit measures may offer little predictive power.
I wonder what her colleagues at the Kennedy School think of this. Ask not what you can do for your country; ask what your country can do for you.
The Modular Kimono
| Dick Langlois |
I recently ran across this interesting paper on vertical integration and subcontracting in the Japanese kimono industry of the late nineteenth and early twentieth centuries. By this period, most of the Japanese silk (and cotton) industries had adopted the factory system. But there remained a few industrial districts that relied on the putting-out system. This paper is most interested in presenting a risk-aversion model that explains why “premier subcontractors” got relational contracts in the putting-out system. I’m not sure I buy it, but in any case what caught my eye was something else — a modularity story:
In the weaving industry of Kiryu, the factory system equipped with hand looms had been chosen to weave the luxury fabrics, while the putting-out system had been used for most other fabrics, until the factory system equipped with power looms became dominant for most kinds of fabrics in the 1910s and later. Instead of being replaced, the putting-out system developed and dispersed within Kiryu, especially from the 1860s to the 1900s, when the main products of Kiryu were yarn-dyed silk fabrics. “Yarn dying” means material yarn is dyed before weaving. For the luxury fabrics that were dyed after weaving, the cleaning and finishing processes undertaken after weaving were important, and those processes were conducted inside the manufacturers’ workshops. In contrast, in the production of the yarn-dyed fabrics, dying, arranging warps, cleaning yarn, throwing, re-reeling, and other preparation processes were essential. Because those processes needed special skills, the craftsmen who specialized in each process were organized as subcontractors by manufacturers. … With the moving weight from production of traditional piece-dyed (dyed-after-weaving) fabrics to production of yarn-dyed (dyed-before-weaving) silk fabrics, the throwing process, the finishing process, and the designing process, as well as the weaving process, came to be put-out. Manufacturers decreased the production inside of their workshops and established subcontracting relations with independent artisans. This case suggests that the technological change induced by the change of products from piece-dyed fabrics to the yarn-dyed fabrics affected production organization.
This has a bit of a Christensen flavor to it. When “performance” needs were high — high-end kimonos — the industry used a non-modular technology (dyed-after-weaving) and an integrated organization. When performance needs were lower — lower-quality kimonos — it used a modular technology (dyed-before-weaving) and a vertically disintegrated structure.
Gordon Winston
| Dick Langlois |
I was saddened to learn of the recent passing of Gordon Winston, an interesting economist who should have been better known (to readers of this blog) than he was.
I’m sure I knew of Gordon when I was a student at Williams in the early 1970s, but as I didn’t take any economics as an undergraduate, I never had any contact with him. I really first met him when he interviewed me for a job at Williams in 1983 (which I didn’t get — not his fault). We kept in contact for a number of years after that, including during at least one Liberty Fund conference in the 1980s.
Gordon is probably best known for his later work on the economics of higher education, which I use in teaching. But readers might be even more interested in his earlier work on the timing of economic activities, which resulted in a 1982 Cambridge book by that title. In essence, Gordon was trying to work out in detail how to think about time in a production-function model of economic activity, something that the late Armen Alchian had adumbrated in his famous paper “Costs and Output” (the original 1958 RAND working paper version of which is now available here). Gordon cites Lachmann and Shackle, but I think his biggest influence was Georgescu-Roegen. The book ought to be especially interesting to grad students, since I suspect it opens up a lot of ideas for further exploration.
Bulletin: Brian Arthur Has Just Invented Austrian Economics
| Dick Langlois |
Surprisingly, the following passage is not from O’Driscoll and Rizzo (1985). It is the abstract of a new paper by Brian Arthur called “Complexity Economics: A Different Framework for Economic Thought.”
This paper provides a logical framework for complexity economics. Complexity economics builds from the proposition that the economy is not necessarily in equilibrium: economic agents (firms, consumers, investors) constantly change their actions and strategies in response to the outcome they mutually create. This further changes the outcome, which requires them to adjust afresh. Agents thus live in a world where their beliefs and strategies are constantly being “tested” for survival within an outcome or “ecology” these beliefs and strategies together create. Economics has largely avoided this nonequilibrium view in the past, but if we allow it, we see patterns or phenomena not visible to equilibrium analysis. These emerge probabilistically, last for some time and dissipate, and they correspond to complex structures in other fields. We also see the economy not as something given and existing but forming from a constantly developing set of technological innovations, institutions, and arrangements that draw forth further innovations, institutions and arrangements. Complexity economics sees the economy as in motion, perpetually “computing” itself— perpetually constructing itself anew. Where equilibrium economics emphasizes order, determinacy, deduction, and stasis, complexity economics emphasizes contingency, indeterminacy, sense-making, and openness to change. In this framework time, in the sense of real historical time, becomes important, and a solution is no longer necessarily a set of mathematical conditions but a pattern, a set of emergent phenomena, a set of changes that may induce further changes, a set of existing entities creating novel entities. Equilibrium economics is a special case of nonequilibrium and hence complexity economics, therefore complexity economics is economics done in a more general way. It shows us an economy perpetually inventing itself, creating novel structures and possibilities for exploitation, and perpetually open to response.
Arthur does acknowledge that people like Marshall, Veblen, Schumpeter, Hayek, and Shackle have had much to say about exactly these issues. “But the thinking was largely history-specific, particular, case-based, and intuitive—in a word, literary—and therefore held to be beyond the reach of generalizable reasoning, so in time what had come to be called political economy became pushed to the side, acknowledged as practical and useful but not always respected.” So what Arthur has in mind is a mathematical theory, no doubt a form of what Roger Koppl – who is cited obscurely in a footnote – calls BRACE Economics.
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