Exploring Interdisciplinarity

The former Chairman of the Federal Reserve, Alan Greenspan has had a long and distinguished career in public service, providing economic guidance to both Republican and Democratic Administrations alike.

Nevertheless, this explanation makes me question Greenspan’s–as well as his cohorts’–naiveté. 

And surely, his shock at the economic situation as well as his explanation as to why he failed to anticipate the problems with the market resonated with many other key decision makers: the economy had continued to perform well for forty years. Nevertheless, this explanation makes me question Greenspan’s–as well as his cohorts’– naivete.

Unfortunately, Greenspan’s lack of foresight reveals a major lack of hindsight. Forty years is but a blink of the eye in the course of time. Had Greenspan and others looked at the performance of the economy from the perspective of the longue durée– an approach advocated by the great French historian Fernand Braudel in his book On History (University of Chicago Press, 1980)– he certainly could have fathomed the market crash, even if he were unable to predict it.

One need only consider the insights of Eric Beinhocker, in his recent book, The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. (Harvard Business School Press, 2006) Beinhocker’s evolutionary approach is consistent with Braudel’s notion of the longue durée insofar as he emphasizes the on-going cumulative processes that converge in the course of history to yield discernible patterns over time. Pointing to the collapse of the English economy in 1315, Beinhocker notes, for example:

Depressions, recessions, and inflation are not exclusively modern phenomena: they are patterns that have recurred since the beginning of recorded history. There are other patterns in economics that are equally old, including the long-run growth in wealth per person. . . and the distribution of wealth. . . For these patterns to be so old, they must be the result of causes that are deep in the workings of economics, cases that are independent of the technologies, government policies or business practices of a particular age. (p. 161)

As the market crash makes clear: the time for interdisciplinarity is here!

Today’s understanding of the present market crisis should not, therefore, be attributed solely to the failure of politicians to regulate the market so as to promote not just profits but also the public interest. Academia is also partially at fault. As Geoffry Hodgson has argued, in How Economics Forgot History: The Problem of Specification in Social Science (Routledge 2002), understanding the economy as it has evolved over the longue durée requires not just a dialogue among disciplines but also new theoretical approaches that build on a long view of history and, thereby, provides a more realistic, while at the same time more complex, level of analysis. As the market crash makes clear: the time for interdisciplinarity is here!

On Technorati: Alan Greenspan, Beinhocker, complexity, economic crisis, economics, Fernand Braudel, history, Hodgson, the longue duree

During my undergraduate days at Syracuse University, I was fortunate enough to have Dr. Jim Price as my economics professor. A fresh graduate from MIT, and a Keynesian, Dr. Price did not view economics as a dismal science. To the contrary, he saw economics as a mental construct that not only approximated reality, but also–and for that reason–could be used to improve upon it.

he saw economics as a mental construct that not only approximated reality, but also–and for that very reason–could be used to improve upon it.

Bloody Dismal Science (Courtesy of Sjamsu)

asked about depressions, and their likely probability, he told us that we need not worry. Now we have the Phillips Curve!

Over the next few years, my enthusiasm for economics waned, not, however, for lack of interest but rather for lack of math skills. As a result–and much to my regret at the time–I chose to study international relations. To be sure, the subject matter was equally interesting and demanding; but, as compared to economics, the discipline’s problem solving ability and methodological approach seemed to me, at least at the time, to be a little fuzzy.

it was not long after, however, that I began to appreciate the decision I had made. For, in the context of the recession of the seventies, and the subsequent oil shocks, the prescriptions that I had learned in Economics 101 no longer seemed to fit. Although the United States still made economic adjustments according to the mathematically proven Phillips Curve, the results were becoming increasingly problematic. The outcome was not greater stability, as economists had led us to expect. Instead the economy suffered persistent stagflation–that is to say, higher prices and fewer jobs. As the late Jane Jacobs characterized this state of affairs (Cities and the Wealth of Nations, 1984), the United States was suffering from underdevelopment. The answer, according to Jacobs, was to shift our focus away from equilibrium outcomes, and to center our thinking on the problem of wealth creation and growth. Jacobs insisted that understanding cities, and how they generate wealth, was the place to start. A non-economist, who employed the wealth of all the social sciences to make sense of the failing US economy–well, that was enough of an inspiration for me.

Faced with the prospects of an up-coming, serious depression, my students ask me what I think. Unlike Dr. Price, I don’t have recourse to an answer such as the Philips Curve. But perhaps this is fortunate. For although I cannot offer formulaic solutions–which may turn out to be wrong–I can provide something that was unavailable in my day–alternative ways of thinking about the economy. Thus, I can point my students to–among other things–Jochai Benkler’s discussions of cooperative growth strategies, which are designed not only to coordinate production but also to generate positive externalities (The Wealth of Networks: How Social Production Transforms Markets and Freedoms) Likewise, I might direct them to Beinhocker’s The Origin of Wealth (2006) for a discussion of the complexity and non-linearity associated with economic interactions. Alternatively, I might suggest that they take a look at Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution, (2004) for a far more nuanced perspective on economic behavior.

Thus, as I see it, the situation is far from dismal. In fact, we have a learning/ teaching opportunity here. Experience has shown us that prescribed economic solutions, no matter how elegant, are typically situation specific. They are vulnerable to changes in the larger environment. Thus, in teaching about the economy, we must provide our students, not so much with answers, but rather with a menu of perspectives from which they can draw, when faced with fast-moving, unpredictable change.

On Technorati: Add new tag, Beinhocker, Benkler, Bowles, economic crisis, economics, Jane Jacobs, Phillips Curve

(courtesy of Wikipedia)

However, what Friedman fails to take into account is that a flat world may–on its own account–be unsustainable over the long run!

However, what Friedman fails to take into account is that a flat world may–on its own account–be unsustainable over the long run!

When considering the shape of the world today, it is important to remember that the structure of information flows–and hence ideas and ideology–is anything but flat. To the contrary, it is decidedly asymmetrical. In fact, as Joseph Stiglitz has argued in Globalization and its Discontents (2002), the US, together with its allies in the IMF, and to a lesser extent the World Bank, have acted in a typically hegemonic fashion, employing their dominance of world-wide communication networks (both institutional as well as technological) to create precisely the same flat world that Friedman describes. Characterizing the negative impacts of the IMF’s policies, Stiglitz points out that the greatest mistake the world financial leaders made in response to the 1980 debt crisis was to unquestioningly adhere to their own economic fundamentalism, notwithstanding its failures, and to insist that one size–that is to say the Washington Consensus–fits all.

the greatest mistake the world financial leaders made… was to insist that one size–that is to say, the Washington Consensus–fits all.

Like Stiglitz, the evolutionary economist Geoffrey M. Hodgson takes issue with the notion that capitalist systems will converge. Pointing to the stickiness of cultural aspects of economic behavior (which he defines as the impurity principle), Hodgson argues that diversity in the global economy is likely to persist (Hodgson et al, 2001, chapter five). In fact, as he contends, just as in the biological world, such variation is essential for survival. For, if, as Friedman suggests, the world is really flat, where can we look for alternative, adaptive strategies in the event of major economic shocks and upheavals in our environment.

For if, as Friedman suggests, the world is really flat, where can we look for alternative, adaptive strategies in the event of major economic shocks and upheavals in our environment.

The rapid spread of the global financial crisis, from one nation to the next, provides one illustration of some of the dangers inherent in an increasingly flat world. Of course, it is still far too early to anticipate how extensive the damage will be. However, the crisis itself provides essential and long-needed feedback about the dangers of pursuing a singular approach, especially if it is wrong. As the leaders of the world meet to develop strategies to address the present financial crisis, the mistakes of the 1980’s debt crisis should not be repeated. All voices need to be heard, and a variety of approaches (insofar as they are congruent with one another) should be tolerated.

On Technorati: evolutionary economics, Geoffrey Hodgson, global economic crisis, Joseph Stiglitz, The World is Flat, Thomas Friedman, Washington Consensus

Last weekend, instead of posting a blog, I attended the annual meeting of TPRC (formerly known as the Telecommunications Policy Research Conference), which was held at George Mason University Law Center.  TPRC has a long and distinguished history. The first such conference was held in November 1972, and its participants included federal employees from the Departments of Justice, Commerce, and Defense, as well as 15 academics, 13 of whom were economists, 2 lawyers (Owen 2004: 351).

Relatively speaking, I am an old-timer at TPRC, having attended my first meeting in the mid-eighties. During that time, I have witnessed the Conference expand not only in terms of the number of participants who attend, but also with respect to their backgrounds and the types of issues being addressed.

. . .I have witnessed the Conference expand not only in terms of the number of participants who attend , but also with respect to their backgrounds and the types of issues being addressed.

Taking these changes into account the conference name was changed to the Research Conference on Communication, Information, and Internet Policy.

This transformation was not always easy, however. Having become fast friends, who take great pleasure not only in each others’ company but also in a common body of scholarship, participants have tended to reinforce one another, quibbling only at the margins, and confining the agenda to familiar, well honed issues and tested methodologies. Of course, new ideas and interests have been introduced, but not without substantial resistance.

The case I recall most vividly was the session in which Bob Kahn, grandfather of the Internet, laid out his vision of the future–a virtual library that would house information accessible to everyone.

Bob Kahn (Courtesy of Marcin Wichary Photostream

The TPRC gathering held last weekend ushered in another breath of fresh air, but this time–perhaps due to the financial crisis–participants appeared much more receptive to the new ideas making their debut. The discussion began on Friday, the first day of the conference, when Rob Atkinson, President of the Information Technology and Innovation Foundation, called for a new ‘innovation economics,’ which takes into account the complex nature of the economy. Jonathan Cave, from the Business School at Warwick University in the UK, expanded on Atkinson’s call for action, laying out the requirements for studying the new, complex economy. His presentation, which was awe inspiring, was echoed throughout the day in conversations in the halls and over drinks and dinner. As well, it provided a back drop for the next day’s session, entitled Telecommunications as a Complex, Adaptive System. Perhaps it is understandable, given the nature of the topic, that most of the speakers at this session were relatively new to TPRC. They included, Richard Whitt from Google Inc.; Stephen Schultze, from MIT; Pierre D Vries, from the University of Washington; and my co-author Ellen Surles, also from CCTP at Georgetown. All of us endorsed the idea that telecommunications in particular, and communications policy in general, needed to be addressed through a lens of complexity.

The paper that Ellen and I delivered in this panel– The Rise and Fall of Media Ownership Issues: A Network Perspective of the Policy Field–was in keeping with the theme of complexity. First, it employed complexity theory and social network analysis to illustrate how issues related to media ownership not only arise on the policy agenda, but also are transformed into legislative outcomes–which we characterized as issue cascades. Based our our extensive data set, we showed that issue cascades occur depending on the size and shape of the interface linking actors involved in policy framing, researching policy solutions, and policy making. When these actors overlap insufficiently, they are unable to overcome their ‘cultural/linguistic’ differences and hence cannot reach a common ground. On the other hand, when policy actors are too closely overlapped, their views are redundant, and so they are unable to achieve innovative and productive ideas.

TPRC had become an effective policy interface–just the right size and shape.

Sitting at lunch with our panel participants, as well as others, we continued the conversation. I was struck by the moment! Here we were, policy framers, policy researchers, and policy makers–many who had never spoken before–discussing complexity and the new economy. The conversation could not have been livelier, nor more engaging. TPRC had become an effective policy interface–just the right size and shape.

On Technorati: complex adaptive systems, issue cascades, media ownership, new economy, TPRC