Paper Review

Studying International Development Applying Theories of Complexity by Chris Muzavazi.

 Evolutionary Economics uses theories of complexity to aid the understanding of economic systems. This paper explores the feasibility of applying these theories to the study of International Development and is awaiting publication. The conclusions are shattering and Chris Muzavazi calls for more research into this difficult and counterintuitive subject. The challenge is immense, how do you communicate to students of neo-classical economics such a controversial viewpoint which strikes at the heart of human purpose?

Chris was born in Zimbabwe studied Journalism, Political & International Relations, and then an MBA at Oklahoma City University, followed by European Union Studies at Lancaster University before a PhD at the University of Liverpool. As a Teaching Assistant at Liverpool he was involved in Complexity Theory in the department of Political Science & Communication and went on to study Research Methods of Theories of Complexity at the London School of Economics.

Further studies proved difficult because the neo-classical approach did not seem to produce any new breakthroughs and there were no suitable supervisors for alternative approaches. Chris is currently searching for a place where he can continue his studies.

Chris Muzavazi produces a powerful argument for a new economic paradigm which merits further research and the attention of all students who question the dubious assumptions of current neoclassical economics and political economy.

Abstract

International Development theory has usually been informed by -

a) Neo-classical Economics and associated unrealistic assumptions of rational equilibrium
b) The Industrial Revolution in Western Europe and political disagreement about the causes.

The existing system of international trade between sovereign states appears to perpetuate underdevelopment and the existing division of labour because of a failure of technological & organisational innovation.

Theories of complexity can provide a better understanding of underdevelopment and how it can be addressed.

New approaches are suggested which encourage the emergence & growth of innovations through positive feedback loops.

Intro

International Development has proved problematic, everyone agrees something must be changed but everybody disagrees on the policy initiatives.
Kuhn suggested scientific progress comes from new paradigms which are initially opposed but eventually emerge as supporting evidence accumulates.

The collapse of the Berlin Wall and the failure of economic planning appears to confound socialism and the economic success of China and the failure of the banking system appears to confound neo-liberalism.

These recent discontinuities drive the search for an alternative paradigm. Theories of complexity can provide such an alternative.

Neo-classical economics and political economy have their roots in classical physics and a mechanical universe, seeking causal relationships between input & output.

Complexity theory has its roots in thermodynamics and biology, indentifying emergent phenomena from non-linear interconnections & interactions between agents in holistic systems.

This paper explores how complexity theory can explain International Development and can influence new approaches to self sustained development.

The first part describes the theories of complexity and the characteristic behaviour of complex adaptive systems, CAS.

The second part identifies the fundamental problem of the existing paradigm and calls for further research and supporting evidence for complexity in economics.

The third part recounts some examples of the failure neoclassicism & political dogma to spur development and explains that failure in the context of complexity theory.

The final part discusses new approaches to development strategy & co-operation.

1 Theories of Complexity

There exists an expanding body of scientific literature on complexity theory drawn from various branches of science - thermodynamics, biology, chemistry, physics, non-linear mathematics, evolution & computer simulation - which describes complex adaptive systems, CAS, and their characteristic behaviour -

a) self-organisation,
b) emergence,
c) path dependency,
d) positive feedback,
e) connectivity,
f) interdependence,
g) non-linearity,
h) far from equilibrium,
i) bifurcation.

The 2nd law of thermodynamics ceaselessly generates evolved CAS of diversity & choice which are physically impossible to manage & control by purposeful design.

2 Complexity in Economics

International Development involves CAS where economic growth is a process of selection by trial & error and bottom up emergence rather than a top down process of management & control by cause & effect.

Some evolutionary and institutional heterodox economists have worked on a new paradigm for economic systems, arguing for complex evolutionary processes to replace rational equilibriums, for example –

a) Geoffrey Hodgson's 'ontology not analogy'
b) Brian Arthur's 'increasing returns'
c) Joseph Schumpeter's 'creative destruction'
d) and the Austrian's 'calculation problem'.

Overturning existing paradigms is a tough call because current system design theory is plausible and claims success. The new complexity paradigm is implausible & counterintuitive as it involves unpredictable unintended consequences associated with the unavoidable parasites, predators, competitive failures in addition to synergies.

Further research & accumulation of supporting evidence is needed.

It is physically impossible to manage and control CAS by purposeful design. The process of International Development involves technological & organisational innovation, a bottom up process of emergence rather than a top down imposition of dogma.

3 International Development using Theories of Complexity

The many examples of inappropriate International Development initiatives almost invariably fail due to either –

- unrealistic neo-classical assumptions of rational equilibrium or
- the political dogma of an elite claiming a knowledge hegemony

International Development theory has five important theoretical sources which tend to ignore complexity theory –

a) classical economics,
b) development economics,
c) socialism,
d) comparative advantage and
e) neo-liberalism.

A common theme emerges; the failure of top down design based initiatives to generate technological & organisational innovations.

4 Development Strategy & Co-operation

An appropriate development strategy based on theories of complexity involves the application of positive feedback loops to the existing diversity & choice of interacting agents which are always present in CAS.

Examples of existing evolved institutions which have proved adept at adaptation through technological & organisational innovation are the ‘public limited company’ and associated ‘industrial organisation’.

An essential insight is that these are wealth creating institutions involving co-operative synergies, the positive sum processes, 2 + 2 = 5, of economic growth. They are not based on the zero sum rent seeking games of nation states within artificial boundaries.

These institutions are both existing & evolving CAS which are bent on growth for survival; eager for the benefits of participation from developing countries.

Innovative specialisation & scale feeds the growth of synergy –

a) specialisation has no limits; everybody has different opportunity costs which can be profitably traded
b) scale has no limits; everybody has a potential to participate as agents of multi national corporations; as customers, employees, suppliers or investors

Growth thrives on positive feedback loops which involve –

a) rewarding success and
b) punishing failure in competitive markets.

These limitless opportunities for innovative technology & organisation are beyond the control of national governments ... they evolve ...

The evolution of CAS is not analogy but ontology; a virtuous circle of natural selection (from diversity & choice) and increasing returns (from positive feedback loops) which have some immunity against parasites (from tort law) and predators (from defence systems) ... and encourage competitive failure.

Conclusion

Theories of complexity, based on scientific insights from thermodynamics and biology, provide an alternative explanation of underdevelopment & its enduring nature. The more conventional initiatives based on the false assumptions of neo-classical economics & the imposition of political dogma have failed.

Feasible development strategies build on existing agents and those interactions which produce the most beneficial emergent phenomena. Specialisation spurs innovation and economies of scale result when specialisation is globalised through trade in international networks.

The most beneficial high value synergies will be discovered by the trial & error process of technological & organisational innovation.

The industrial systems of global businesses are examples of successful CAS which have emerged involving technological & organisational innovations.

Regardless of state boundaries International Development will benefit from unrestricted participation in positive feedback loops which reward such successful innovations of high value/low cost production of goods & services and punish any failure by bankruptcy.

A bottom up process of emergent survival rather than a top down intervention of intelligent design.

john p birchall

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