Business & Finance

Origin of wealthSimilar to a lot of the social sciences, business economics has frequently experienced something of an inferiority complex with respect to not being a ‘true’ scientific discipline. In an attempt to make the subject much more of a real science, the disorder of real life has undergone a variety of clarifying inferences and abstractions. An essential premise is that an accessible economy is basically in balance (supply equals demand) and disruptions to that stability smooth out with time. This is the main dogma of contemporary financial theory, and it is, according to Eric Beinhocker, incorrect. The concept of financial stability originated from an effort to use old theories from the science of thermodynamics in business economics. It was in part a reaction to an inferiority complex that appears to affect so many of the social sciences. Nevertheless, it’s to physics and information technology that some financial experts are now seeking new ideas and principles to assist in designing economic systems instead of relying on old paradigms established by generations of economic theorists. The end result is a brand-new ‘art’ that has actually come to be referred to as ‘complexity economics’. Beinhocker’s publication does a skillful job of exposing this revolutionary re-thinking of financial concepts. Instead of just getting straight into a dialogue of complexity concepts, Beinhocker starts with a study of conventional business economics. This section of the manuscript examines the record of financial opinion, from the very first days of the classic concepts of Adam Smith and David Ricardo on through to the contemporary. It’s a brief analysis, prying apart the essential concepts before Beinhocker provides a review and explains the differences between hypotheses and fact. Having introduced the central ideas of complexity economics, the guide then proceeds to address the way in which these concepts can resolve the problems that standard economics can not explain: for example, exactly how is prosperity established? The last part of the manuscript considers what the paradigm change that is complexity economics implies to the arenas of the corporation and to national politics. Naturally there are going to be ramifications to this altered perspective of the globe, and Beinhocker pulls several of these out, both with regards to business methods as well as with regards to national politics. Unlike the previous parts of the book these sections are much more abstract and even more speculative. Nonetheless, his conclusions are fascinating and if they set off debate, it’s all for the better. Beinhocker composes with enthusiasm about his subject matter, captivating the audience at all times as he delves into a specialty that is still developing. Ultimately, this is a crucial and interesting book which is a must read for any aspiring economist.