Complexity and Community are crucial for rethinking economics

What could society look like if we do economics better?

Do mine eyes deceive me? I came across this post by Evan Davies on the BBC website, where he blogs about the changes taking place in economics. For those fond of the TL;DR, he says that economics has been, and still is, in need of a radical overhaul, given that most economists did not foresee the 2008 financial crisis, and that economics has not addressed its flaws in the decade since. Davies sets out the “two Cs” that make “neoliberal” or orthodox economics models risky (to put it mildly), and these are Complexity and Community. The short version is that people are Complex souls who live in Communities. Well, duh! Some of us have a been banging on about this for a while now.

Davies is clear not to make a straw man of mainstream economics though. And this is an important point. Microeconomics – the small-scale interactions between actors – has been remarkably successful in boiling down our collective lives into theories, formulae, and models that guide economists towards understanding how we act (and then nudging us in the right direction to make better decisions). But macroeconomics – the larger scale stuff that includes GDP, interest rates, international trade and investment and so on – tends to draw on the microeconomic theories and scale them up. But as we all know from experience, the more people you include, the more complicated it becomes to plan anything. And that’s before you start on complex interaction patterns across communities and societies.

Why have things started to change now? As I wrote in a previous post, change occurs gradually. Many successful careers have been built on the status quo of neoliberal or neoclassical, orthodox economics. The core of the academic economics community has developed, advocates, practices and teaches this approach. So revolutions, as in most areas of life, tend to be the exception. When we start to question the entire shape and direction of a discipline, there are myriad interests at play that all need to be reoriented. The mainstream journals, senior economists, and general momentum is geared towards neoclassical theory, and its implementation as neoliberal economic policy. In short, we are steering an oil tanker rather than a Mini Cooper.

Secondly, neoliberal economics is plugged into and reflected in the political mores of the day, and neoliberalism in politics remains in the ascendancy. A theory of economics that retreats from and questions this is bound to raise eyebrows. Perhaps then, eleven years might be a relatively short timespan for the reorientation, or evolution, of a discipline.

So what changes are actually happening now? The past decade has seen a wave of literature questioning the type of society we want to live in, both locally and globally, and the type of economics that might realise this.

But there are more recent projects turning explicitly to the way we do economics and its role in society that are much more exciting. The NIESR has a project underway Rethinking Macroeconomics, which is ESRC funded. The IFS is launching a project looking at inequality in the UK and targeting questions like the kind of society we want (a particularly timely question in the light of the most recent UN Report citing poverty as endemic in the UK). And then there are the centres rethinking traits of orthodox economic theory like the Paul Woolley Centre at LSE, the full title of which is “The Paul Woolley Centre for the Study of Capital Market Dysfunctionality”. The Centre essentially asks what happens if the frictionless markets featured in economic models suffer from, well, friction.

But what alternatives are there? If you’re familiar with some of my previous posts, you’ll know I’m a fan of socio-economic and econo-socio-legal approaches that take economics back into the social sciences. There are myriad alternatives though within these disciplines, including relational work, actor-network theory, community lens, network analysis, systems analysis, and many more. Zooming out somewhat, historical, geographical, psychological and anthropological approaches can also contribute to an understanding of economics as it really is performed in the real world.

But, why should we care? To make a bold, and controversial statement, economics is usually one cause of most social issues facing us today. What do I mean? The rise of populist politics caters to the anger and frustration of the “have nots” in society (economics). Austerity as a response to the financial crisis enacts neoliberal economic theories (economics). The lack of living wages and the rise of insecurity, the precariat, and the gig economy has resulted from technology and a reluctance of government to intervene based on neoliberal economic theories about the free market (economics). Climate change and global warming continue unabated because of the economic consequences of actions to tackle environmental issues head on (once again, economics).

In short, if we want to get society right, we need to get economics right. And that means a retreat from the belief that there is one “right” way of “doing economics”. It means recognising (or re-recognising) that economics is about how people act and interact. And that we do not always act rationally, or even in our best interests. Until economics models and formulae reflect this, we are left with a hollowed-out version of economics that cannot reflect the full complexity of real life. And this is something we all pay the price for. A broader, richer understanding might help us spot the next financial crisis looming on the horizon.

My original research plan (oh, how things have changed)!

I’m in the process of moving everything over from my old site to this shiny new one, and wanted to bring some of the content with me. This (included below in this post) is one of the original pages I wrote for the old site, back in 2012 or so, when I was just starting out with the PhD. Reading back on it now is a little bit like looking back over a long journey and realizing just how far you’ve come. The final draft that I’m about to submit is so different to what I originally wrote!

Of course, this is all completely normal and just part of the process of doing a PhD. But there are a couple of other things that have leaped out at me too, rereading over the abstract. There’s so much “jargon”! There are entire sentences below that make me wince. It’s not that I don’t understand the terms – I’m completely comfortable relating to and with the ideas. But really, my supervisor and I are the only two people in the building who understand what I’m talking about, then what is the point?

This has become quite a significant part of the drafting process as time has gone on, and I have another blog post lined up about this. But in the meantime, the only way research is going to have impact in the real world is if people in the real world can understand what you’re saying. And for this to happen, the research has to be accessible and in plain English (as well as interesting, engaging, and relevant, of course).

In the meantime, here is what I was embarking on some seven years ago…


Recent World Bank policy documents are notable for hinting at a retreat from doctrinaire reliance on “investment climate” discourse frameworks. Although the concept of an “ideal paradigm” still informs much of the World Bank’s lending and consulting praxis, there has been a reappraisal of the empirical certainties underlying many assumptions. While a quantitative, leximetric approach to law and governance continues to define World Bank ideology, assertions of causation between these and economic development are increasingly being questioned.

By taking a socio-legal approach to an investigation of the interaction between law and the economy, this research offers a new approach. Taking law as a socially constructed phenomenon existing as perceived by the actors in their interactions both with each other (economically-oriented actions and interactions) (see the work of Roger Cotterrell) and with the local laws (operating on a range of scales from the micro, macro, meta and meso levels (see the work of Sabine Frerichs and Amanda Perry-Kessaris), this approach questions both current terminology as being overly laced with economic theory, and the frameworks that deny the normative bias of much of the current discourse. The research responds to calls for careful empirical socio-legal studies by Cotterrell and Swedberg, amongst others, by conducting grounded-theory informed ethnography in Sri Lanka, interviewing foreign investors about their interactions with the legal system prior to, and during the investment process. The framing of law in a socio-legal paradigm thus facilitates the use of the results not only to engage with questions of correlation between the legal environment in Sri Lanka and the actions of foreign investors, but also with causation; understanding clearly the motivations and perceptions of the investors themselves.

The results will enable clarification of the interaction between law and the economy in Sri Lanka, as well as the use, abuse and avoidance characteristic of the interaction between foreign investors and local laws. It is then possible to ask whether legal and governmental reform lending conditionalities recommended by the World Bank and other International Financial Organizations (IFOs) were a factor in the attraction of foreign investment to the country, and to what extent this might have been the case. The results will allow for an appraisal of current IFO policies, as well as the extent to which Sri Lanka should tailor its legal system to the requirements of foreign investors, potentially at the expense of other actors in the domestic legal and economic systems. Moreover, a careful selection of interviewees should allow a comparison between attitudes and approaches towards the importance of formal law and legal systems in an investment situation, both along nationality and institutional sectoral axes. This should thereby facilitate closer appraisal of the legal reform process with respect to more accurate tailoring of the reforms depending on the desired outcome. This should also work to minimise unintended, and undesirable, side effects of reforms on local businesses and entrepreneurs, while facilitating investment according to policy objectives.