UPDATE: Thanks to the commenters who confirmed the “hostile reactions” thesis while disavowing hostility :>)… By the way, I am surprised nobody has yet mentioned that blogs, Twitter, Facebook, etc. are superb examples of Spontaneous Order.
I was surprised by hostile reactions to mentioning complexity on the Ivory Coast coup debate. Of course, I dish out hostility like water myself, so it’s only fair that I got accused of mindlessly mumbling complexity to sound trendy.
Regardless of exactly what language you use and whom you give credit for what ideas, I think we can all agree that Complex Adaptive Systemic Emergence of Spontaneous Order General Equilibrium in Development (acronym? don’t go there) incorporates the following ideas, all of which I think are really exciting.
- Nobody designed it.
- Surprisingly simple behaviors and rules can result in complex phenomena.
- Spontaneous order is not automatically good.
- Actions can have unintended consequences.
- What do you mean by “actions”?
- Partial equilibrium analysis still works.
The old idea that complex phenomena imply a designer (an old argument for the existence of God) doesn’t survive. Surprisingly complex phenomena can emerge without design, like Dawkins’ “Blind Watchmaker” in evolution. The same in development.
Corollaries: nobody needs to direct it. nobody needs to even understand it.
A lot of the complexity of nature (to keep using the evolution metaphor) results from the very simple principle of Natural Selection. The analogue in economics is the Invisible Hand, which is also very simple (the latter inspired the former, by the way).
The Mafia is a spontaneous order, case closed. In economics, we get the good “Invisible Hand” outcomes when private returns equal social returns (which, uh, is not true in the Mafia spontaneous order).
In neoclassical economics, one example is the Theory of The Second Best. If there is one part of the economy where private returns do not equal social returns, then correcting a different part of the economy to make private returns equal social returns could actually make things worse rather than better.
It should not be too hard to think of Finance examples from the recent Crash. Could somebody please suggest something like how going more “free market” in financial deregulation when the government was implicitly bearing a lot of the risk….made bad things happen?
In development, the trend is to think of more and more things as the undesigned, unplanned outcomes of some spontaneous order…institutions, politics, cultural values, social networks, and so on. So there is nobody left to stand outside the whole system and pull a lever to move everything.
While (1) through (5) apply to the whole system, you can still simplify by isolating a particular part where you can usually link actions to consequences (and then cross your fingers that the general equilibrium effects don’t cancel out or reverse the partial equilibrium prediction).
So I still feel confident saying that price controls will lead to long lines and are a bad idea, that expropriating private property will decrease investment, and that letting you choose for yourself is usually better than having the Central Authorities tell you what to do.