COMPLEXITY IN ECONOMICS: SYSTEM DYNAMICS AND POLICY IMPLICATIONS

The purpose of this essay is to consider the impact of systems dynamics thinking when one is dealing with complexity in economics, to discuss the basic lines of a conceptual framework for the analysis of complex economic systems and to propose a synthetic but comprehensive approach to the problem. The treatment of the subject is organized in three parts. Part One has an introductory and essentially de-constructive character. There is a critical examination of the present state of the controversies on the theory of value and capital. The basic idea is that the surplus approach has a limited role to play in a capitalist economy, where commodities are produced for exchange, rather than for direct use. Part Two has a reconstructive character. It deals with the formal treatment of economic complexity in system dynamics and involves a radical change of analytical perspective: the passage from the traditional informal approach to the problem of economic policy to a computer-based mathematical approach conceived in a complex system framework. In Part Three this perspective is further developed and its main implications are considered. The differences between chaos theory and complexity theory are analyzed and the connections of economics with statistical physics and quantum theory are recalled. Finally a set of conclusions on the application of the science of complexity to system analysis in economics are drawn. They go in the direction of an integration of knowledge from various disciplines.