17
instability where complex interactions intuitively could generate chaos.13 In this view, the
thought that one could develop a micro foundation of macro without considering the
feedback of the macro system on the individual is beyond belief. While it may still make
sense to push analytic macro theory as far as one can, to see whether it will provide any
insights, in the short term, such analytic extensions of analytically solvable pure
theoretical models based on assumptions that are far from reality offer little hope for
policy guidance. In the absence of a pure theoretical foundation, macro policy is best
based more on statistical models that pull as much information as possible from the data.
Empirical macro precedes theoretical macro.
7. Conclusion
When we first made the above arguments about complexity a decade ago, they were far
more controversial than they are now. During that time, economics has changed and
become more open to all the approaches we have suggested constitute complexity
economics, so that now, it is becoming more and more, just economics. We are not
saying that the movement to the complexity era is going to be smooth, or that the work is
without problems. We recognize much of it has serious problems that will require a lot
of work and weeding out. For example, some areas, such as experimental economics--
have become fads, and an ever-increasing number of economists are including
experimental work in their research. Such fads will require a weeding out, and a far more
careful specification of what is an acceptable experiment and what isn’t than currently
exists.
13 Of course, while true mathematical chaos is locally unstable, its fluctuations remain bounded, thus being
consistent with the “corridor of stability” argument of Leijonhufvud (1973, 2009), along with the deep
ecology idea of Holling (1973) of a possible tradeoff between resilience and stability.