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Beinhocker's book introduces these important issues for the rest of us who have real jobs during the day, simplifying the decades of scholarship we need to change our simple minds, brainwashed during our linear, deterministic, doctrinaire (a term another reviewer used that I love) educations in the nation's best and finest institutions. The Harrison and Huntington research on the importance of trust for economic performance speaks ions, considering the cavalier attitude taken today in the US concerning trust and relationships (page 433 in my copy of the book). The failures of traditional economics, of course evident today, were already called into question in the late 1980s, when John Reed of Citicorp couldn't understand why his economics and finance geeks couldn't call the real estate bubble that almost brought the bank down. Something akin to Venezuela (and communists elected to democratic governments) emerges. I was fascinated to learn (but not too pleased) that this conflict was centered at one of my own alma maters, who seemed to have got it wrong along with Chicago. Reed funded the Santa Fe Institute, to force economists to defend against real scientists in natural sciences and physics. Trust). While I don't agree with the opening story that someone in NYC earning $30,000 is implicitly better off than someone living in the Amazon on $0, in principle, I agree with the book in total and especially the end.
This is where they finally realized that Economics stopped with the linear- First Law of Thermodynamics, when all the rest of science evolved from the non-linear Second Law. The other important lesson is that social capital and culture are the real determining factors for an economy's success, when comparing two nations with equal natural resources and access to transportation. All of that third leg was conveniently overlooked by Milton Friedman and his pals with their simplistic linear models and dummed-down assumptions of human nature, and human culture (i.e. Most of the world operates in low trust, and their economies show it. Duh. The idea of scowling unhappy faces in 'wealthy' NY or London in contrast to broad smiles and lilted laughing voices in places like Africa is one I have experienced and puzzled over myself. The book does a great job introducing the new emergent fields of economics that challenge our traditional economics, based as they are on linear mathematics, and merely the "first law of thermo-dynamics" published in France during the Enlightenment. He also explains very well what a Big Man economy is, and why Big Men running things means most of the world hasn't been able to create spontaneously self-organizing and self-generating economies powered by everyman and everywoman.
We'll see what it will take to recover from where we've fallen on the trust scale. Of course, traditional economics is still arguing about only two legs to the stool, market solutions and limited state, completely overlooking the importance of social capital and social assets as the third leg. I see that some other reviewers wanted or needed more, but the references to the original research are all there for further reference, especially something as basic to graduate finance courses as the "prisoner's dilemma". We're there now too, in case nobody thinks a few corporations, and a few hundred men and women in congress are not acting in synch like one Big Man.
Social capital of course costs money for education, healthcare, social institutions, etc., which eats into micro-economics notions of profits, but not the nation's profits as a whole. HA. They got so much attention from conservatives, with endowed chairs and appointments to Washington Consensus institutions as carrots by conservative money who saw the magic in what they could buy to undermine perceived value of our social capital all these years. He introduces quite well the conflict between complexity economics evolved from the not so emergent field of behavioural economics, and traditional economics which relies on such notions that all men are rational, and will make the same economic decisions under the same conditions.
I have a feeling a very long time, if ever at all. The most telling is the Sugarscape model, which shows exactly how a few kings of the hill emerge when natural resources, intelligence, and access to transportation are unequally distributed across people in a landscape. It only survived for 'too big to fail' doctrines and Washington Consensus Big Men roping in a Saudi Prince to put in the cash Reagan's Congress wouldn't do. This book goes a long way to introduce in simplified terms decades of academic theory and research for a lay reader.
Just the use of words like complex, technology etc makes the book not as excited as it should be. It stabs right into the weakest part of traditional economics. Our times has changed from Analysis time to Synthesis time, from Left brain to Right brain But the book will endure the test of time. As a former lectuer with background of dynamic system (linear, non-linear, discrete time and discrete events ), I was shocked to see the assumption made in economics. The time delay, discrete events (some events have significant impacy) have to be considered to make the theory to have any practical use.
His broad effort combines complexity theory and advanced adaptive systems with the latest thinking on biological and evolutionary science to give Beinhocker a business book for use not only by the titan's of industry but for anyone else who participates in our economy. So the next time you are holding a glass to get a drink of water, you might ask, did the same forces of nature that brought you an opposable thumb, also bring you indoor plumbing and the kitchen sink. The same rules that are now screaming at society to protect the air that we breath and all of the natural resouces we need for survival. And wealth, according to Beinhhocker is the creation of "Fit Order". In order for markets to emerge, adapt, and evolve, in the biological sense, they have to be alive. Meaning you don't have to be studying computational economics or be enrolled in business school to read, understand, and learn from this book.
Beinhocker would say yes. It's called "The Origin of Wealth", and is subtitled "The Radical Remaking of Economics and What it Means for Business and Society". But if Eric Beinhocker could have another shot at it, he might call his manifesto, "The Origin of Everything" and subtitled it, "Including the Kitchen Sink". What he has clearly proven is that traditional economic theory is dead, the economy is far more dynamic and unpredictable to believe in assumptions about rational markets and equilibrium states.
Unlike biological evolution, it's impossible to prove scientifically that our economy evolves in a similar fashion, but he has made the necessary case. Does Beinhocker have it right. Although he doesn't explicitly state it, if it's evolution that drives the markets, it has to be biologically based just as certainly as our DNA has created a life support system that has arms and legs and systems that bring air and food to our cells. Add this book to your environmental reading list as well, Darwin is calling.
These systems are now detached from our physical bodies but are still driven by the same rules embedded in our DNA. You will have to read the book to understand what he means by "Fit Order" but his type of wealth is not about dollars. It has therefore created other systems to ensure there is an abundance of everything else we need to survive. He has a case, as few others have had, at claiming this honor.
We see similar emergent behaviour that certainly suggests that markets are alive because commercial entities are born, live, and die within it's boundaries. Toss in a little thermodynamics and stir. Very few people, Henry David Thoreau and Ted Kosinski , come to mind, are not active in the evolutionary gene pool that is the global marketplace for the creation of wealth, and thus will not gain wealth from this book. Don't read his book to become rich, read his book to keep from becoming poor.Even if you do not buy-in to his theory, you will get a first class treatment of economic systems, traditional economic theory, complexity, non-linear systems, game theory, advanced adaptive systems, networks, evolutionary theory with it's fundamental aspects of emergence and selection, along with the necessary aspects of business strategy development, finance, and ultimately politics.
Overall, I strongly recommend this book, just dont expect a classic macro/micro economics text. For example, although his depiction of the economy as a platform on which evolution can act entirely convincing, it lacks any clear framework for handling recessions, interest rates, demand/supply, etc.The last quarter of this book is a little long and could have used a little more editing. The first three quarters of this book are the closest thing a text of his kind comes to a page-turner. Evolution as a search algorithm, exponential explosion of SKU in the developed world, stock market analysis, network theory, organizational theory, etc.On the other hand, although Beinhockers theory of "Complexity Economics" is interesting, it offers little in terms of explanation of classical economics theory.
My biggest disappointment was that it was written before the current economic turmoil. He may have been arrogant in his discussion of Traditional (capital T) economics, and I felt that he did not have a comprehensive understanding of some of the non-economics related material, but overall it was a fascinating read. I would have loved to have read the complexity economists take on it.I highly recommend it. Many people have complained that the book lacks focus in its discussion of complexity economics, but I disagree. In fact, I was surprised that Beinhocker was able to fit everything that needed to be said into a book under 500 pages (discounting the foot notes and bibliography).
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