The economic crisis is an opportunity for new ideas and thinking to emerge, especially at this defining moment. Previous blog posts have raised questions about how economic models are constructed and the power of agent-based models to better capture human behaviour.
The economic crisis has allowed for new ideas to be tested as system scientists at the Argonne National Laboratory are now constructing agent-based economic models; a timely departure from traditional models that have proven to be ineffective in capturing complexity, let alone predict economic crises.
The Argonne team designed their agents after studying surveys which asked participants about the factors which influence their economic decisions.
This is an important step forward in developing a new understanding of economics in the post-industrial age – out of a crisis, new ideas can emerge from the noise of myopic mediocrity.
For any progress to be made, people’s attitudes have to change, there were people in the industry that foresaw the financial crisis but their warnings were ignored mainly because those who stood to gain from the risk taking have far too much influence.
Unfortunately, a crisis is not only an opportunity to make things better, but also an opportunity to push unpopular political decisions through, cloaked with the seal of necessary evil. Anybody read Naomi Klein’s Disaster Capitalism ? I haven’t yet come around to read it, and it might be over-exaggerated, but there’s certainly truth to the idea that threats can be exploited by the powerful for their advantage. So we better watch out.
James, you’re quite right. There is also an economist who over a number of years was predicting an economic meltdown but was ridiculed. He has now become quite the celebrity.
I haven’t read that particular book Sabine but I am familiar with some of the arguments posed in her book. The interesting thing to see will be how Obama’s team handle the economic crisis. I had hoped that Obama would have called more upon the new generation of economists like Austan Goolsbee but I think people in his team thought that would have been too radical.