Simplifying Complexity
How economic policies are gamed
Oct 16, 2023
W. Brian Arthur joins the show to explore how economic policies are gamed. They discuss gaming systems, manipulation in the 2008 financial crash, and the vulnerability of economic systems. They also delve into the consequences of private control over financial systems and the need for understanding and addressing these issues.
36:54
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Quick takeaways
- Complex systems exhibit emergent behaviors that are often unexpected and not designed into the system, highlighting the need for a forensic branch of economics to analyze and understand failures.
- Economists can identify weaknesses, anticipate potential gaming strategies, and design more robust systems by stress-testing economic models and policies.
Deep dives
Difference between complex and complicated systems
In this podcast episode, the host discusses the distinction between complex systems and complicated systems. While complicated systems can be understood by breaking them down into their component parts, complex systems rely on the interactions between those parts. Complex systems exhibit emergent behaviors that are often unexpected and not designed into the system. A notable example is the tax system, which starts as a complicated system with rules but can turn into a complex system when people exploit loopholes and engage in tax avoidance.
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