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Complexity and Policy
Lorentz Workshop on Socio-Economic Complexity
Leiden, 23– 27 March 2015
Carlo Jaeger
Global Climate Forum, Beijing Normal University, Arizona State University
Complexity, Austerity, and Growth
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Prelude
1. Multiple Equilibria, Good and Bad
1. Equilibrium Selection trough Norm Dynamics
1. Policy Design: Optimal Control or Co-Evolution?
1. Green Growth for Europe?
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Contents
27 March 2015
From Trichet, bypassing Weber, to Draghi:
“countries have found themselves in a bad equilibrium”
“we will do whatever it takes…”
Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
The Fundamental Theorem of Demand and Supply(Sonnenschein-Mantel-Debreu)
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Equilibrium Selection and Norm Dynamics
Background: M.Burke, H.Peyton Young, Social Norms,In: Handbook of Social Economics, 2011
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Norm Dynamics and Resilience of Currency Regimes
M.Hallier, Formalization and Metastability Analysis of Evolutionary Agent-Based Models (PhD thesis, HU Berlin)
Tim
e
Distribution of Currency Choices
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Contents
C. Jaeger, A Choice for China, China & World Economy, 2014
Norm Dynamics: Austerity or Professionality?
Tinbergen: At least as many policy variables as policy goals.
Theil: Set policy variables so as to maximize a social welfare function.
Goodhart: When a measure becomes a target, it ceases to be a good measure.
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Tinbergen, Theil, and Goodhart
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Socio-Economic Complexity RequiresCoevolution of Policy and Economy
→ Fast→ Unemployment→ Median incomes
→ Intermediate→ Inflation expectations→ Accountability of financial operators
→ Slow→ Coordination between European nations→ European professional culture
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
The Time Scales Challenge
→ By 2050, global population will grow from 7 to more than 8 billion people
→ In the coming decades, global GDP will grow from 80 trillion to over 300 trillion $
→ A these scales, continuation of present patterns of polluting air, water and soil with their associated health risks will not be accepted
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
The Green Growth Frame
→ Environmental damages
→ Learning by doing from investment
→ Matching tasks and skills
→ In a preliminary way, these can be taken into account by stepwise improvements of existing models
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Socio-Economic Complexity: Three Intertwined External Effects
21.04.23 Page 15Carlo Jaeger (GCF) | Investitionsorientierte Klimapolitik
Preliminary results of a project for the German government
21.04.23 Page 16Carlo Jaeger (GCF) | Investitionsorientierte Klimapolitik
Preliminary results of a project for the German government
→ Study links between finance and “real economy” in a green growth perspective
→ Add useful features to existing models
→ Build multi-agent models as iterated games in complex networks
→ Stay hungry, stay foolish
27 March 2015Carlo Jaeger (GCF) | Complexity, Austerity, and Growth
Some Research Directions to address Socio-Economic Complexity