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Complexity Science and the Art of Public Policy

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Complexity Science and the Art of Public Policy: Solving Society’s Problems from the Bottom Up

by David Colander and Roland Kupers

Book Summary by Inday Ransom


1- The Complexity Frame for Policy

Colander and Kupers both argue that complexity is the missing link in thinking about policy. Complexity science views the social system as a complex evolving system with many components that are also everchanging, and government is just one of these components.

The authors say that the complexity policy frame rejects the standard policy frame—which views government control on one side and free market on the other. In contrast, the complexity policy frame believes that both must be involved in policy thinking. In complexity science, a policy cannot control the social system as the system is constantly evolving. However, they argue that policy can influence the social system into solving social issues—healthcare, finances, and climate change. 

Unlike the standard policy frame, the complexity policy frame addresses the interconnectedness of these issues. In doing so, policy makers can explore ways to guide people into choosing desirable actions to solve these issues. They explain that the government can create policies that allow people and institutions to solve social issues from the bottom up rather than controlling these issues from the top down.

In this chapter, the authors demonstrate that the duality of market versus government is a byproduct of the standard economic policy frame. This duality disappears in the complexity frame, but it does create other contrasts. In complexity science, if both “government” have more active top-down solutions and “market” have less active bottom-up solutions, it is the result of society’s more primitive bottom-up choice. The authors argue that the government cannot be blamed for policy failures since the structures that determine policies are created by society’s choices. 

The authors express that a powerful government must be committed to individual freedom and not use its power unless to secure a fair and competitive microstructure. In the complexity frame, the government has an alternative role, that of a midwife, not a controller. By fulfilling this role, the government prepares and fosters positive social and economic outcomes into fruition, which is not considered in the standard frame.

Complexity science includes government as an essential role in the free market, not as a planner or controller, but as a natural partner with existing institutions in pursuit of parameters of actions. The authors call this role an “activist laissez-faire” policy. The authors use Keynes’ insight on government and free-market as an example of activist laissez-faire policy: the economy shouldn’t have direct governmental control, but it may need its guidance at times. 

Colander and Kupers believe that leaving society to solve common issues is a bottom-up policy that is more attractive than having the market or government solve societal issues. The authors suggest that supporting an ecostructure policy that encourages development may be needed to support complex solutions involving social goals.

Current policy makers rely on two simple models: the standard policy model, which views the government as correcting market failures for the system to operate efficiently; and the fundamentalist policy model, which views the market as self-organizing and sees government involvement as an attempt to control evolution, and thus, government intervention being unwanted. 

The complexity policy model views the social system as evolutionary; government, institutions, and the market are seen to have coevolved. Government and institutions developed to assist the market. Thus, all are necessary for the system to function. 

Although the complexity policy model includes government in the social system, it does not allow the government to control the system. However, the authors note that government policy plays a crucial role in this system, and its policy decisions can aid in the system’s evolution. An example they provide is that the government can implement a bottom-up policy that encourages society and private institutions to influence the economy’s evolution in ways they believe are desirable.  

The authors explain that the complexity policy frame cannot have definitive answers to policy, but it does get guidance from theory. Agent-based models are simulations that use interconnections to see if it can reproduce macro patterns. Policy makers can use agent-based models to find what rules can govern the evolution of a system.


2- Exploring the Foundations

Colander and Kupers explain how economists struggle to develop a model that includes the essential components of the economy misled the public. The public assumes that when economists support a policy, their support is based on scientific knowledge and theory. But more often than not, many economists have opposing policy beliefs based on their interpretations and assumptions of the same theory.

The authors say good economists knew this but did not emphasize this in their writings. Such as in a laissez-faire policy; laissez-faire policy is often interpreted as the government should “do nothing.” Colander and Kupers iterate that many prominent economists believed the state should think wisely before entering the complexities of the economy.

They argue that the problem wasn’t that either side was wrong, but that they both left out the important discussions of policy: the role of norms in policy; how peoples’ activities shaped them and led to what people wanted; they did not question the assumption of reality and how policy would deal with irrationality; the problems with material welfare as a measure of welfare; how morality would fit into policy discussion; nonlinear policy issues; and the problems of existing structures. 

The authors state that macroeconomics was created in an attempt to add complexity to the standard policy model by focusing on a subset of issues— i.e., fluctuations, unemployment, inflation. But the complexity of macroeconomics was lost due to oversimplification. 

Colander and Kupers argue that John Maynard Keynes’ understanding of complex macroeconomics, known as the “Keynesian model,” left out all the dynamics to simplify the framework. Classical thinking adopted his simplified framework. But this wouldn’t be the last time his model would change.

The Neo-Keynesian model was developed to fix Keynes’ lack of complexity dynamics. But in the process, they removed the complexity foundations as the math was too complicated.

In this chapter, the authors introduce the Santa Fe Institute, founded in 1986 by numerous prominent scientists from various fields. They believed that standard scientific methods had insufficient ways of analyzing and understanding nonlinear systems and crucial microlevel interdependencies. 

When the time came for Santa Fe’s first workshop in economics, the scientists faced significant resistance from economists. Economists believed that the math was too complex and felt that these ideas undermined their beliefs.

Before Brian Arthur joined Santa Fe, he comprised a list comparing standard economics with “new economics.” His new economics includes all interactions and does not assume the nonmarket social interactions among people. The authors state that all models make assumptions; however, standard economics assumes interactions because incorporating all interactions would be too complex in the standard model. 

Colander and Kupers mention that modern economics implements behavioral game theory foundations based on empirical observations. They first reference how economists use behavioral science to study how people make choices and how they can influence people’s behavior, then integrate those insights into economic theory. Then the authors mention that the rise in computer power has made empirical work much easier for economists. They can study data based on real-world measures and use it to figure out what patterns they can influence. The third aspect of modern economics is the use of game theory as the core analytical tool in identifying issues, as game theory has indeterminate results.

The authors discuss the interface of complexity with the policy sphere of economics and how developments in economics reflect complexity ideas. They argue that the standard model is just one of many economic policy models and that accepting the complexity policy model will lead to new developments in economics.

The authors provide three complexity ideas that are now incorporated into economic policy thinking. The first development is increasing returns—the likelihood for what is ahead to get even further ahead. The standard policy model cannot incorporate significant amounts of increasing returns because it cannot have more than one equilibrium. Thus, the complexity model would have to be used to account for significant amounts of increasing returns. 

The second complexity development is behavioral economics, which finds that people’s behavior is far more complex than assumed in the standard frame. The standard frame assumes people will behave rationally or selfishly. The complexity frame believes this to be true but also believes that people can behave irrationally, selflessly, and in various ways. The authors point out that behavioral economics can suggest that policies can “nudge” people to choose desirable actions. 

The third complexity development is the inclusion of diversity in economic policy thinking. Colander and Kupers say that diversity implies that industries are all interconnected, which allows them to survive. 

The authors conclude that policy implications are much greater than in some suggestions, and complexity advances are not making a considerable impact in macroeconomics than in microeconomics. 


3- Laissez-Faire Activism in Practice

Colander and Kupers discuss how norms policy can help influence the economy’s evolution. The standard policy model believes that norms and tastes are outside the government’s control. The complexity policy model also acknowledges that norms are outside government control. It also assumes that people don’t have fixed norms and tastes but are also evolving. 

The authors argue that norms policy can be designed to encourage and discourage norms. It’s not about government top-down control but rather a bottom-up influence. To do this, the authors assert that institutional ecostructure must be redesigned to accommodate new policies.

This chapter describes the goals of complexity policy, and how they differ from the standard policy frame. The goals of complexity policy is for institutions to consider bottom-up policies that allow systems to: survive; stay resilient; encourage and incentivise socially desirable actions; and allow temporary measures that help society overcome difficult situations.

After these goals are formalized with policies, bottom-up dynamics will take over. All of these goals are not considered in the standard policy frame. The complexity policy frame includes these goals, but the authors state that these do not fix any of those issues. Though, it does encourage policy makers to think about goals first, and then models. The authors suggest it becomes less likely to be misled by the complexity policy frame.

The authors argue that a complexity policy approach to government issues can change how people think of policy. The authors show how small changes in ecostructure, especially in the early stages of institutions, can radically transform society from the bottom up, even without significant government intervention.

Colander and Kupers explain that when institutions are designed to encourage people to take on social problems, then social entrepreneurs are incentivized to create sustainable bottom-up governmental social solutions. Because this “bottom-up social policy” stimulates social solutions and profit, it would be classified as a “laissez-faire activist” policy. This policy can replace for-profit and nonprofit institutions with socially “for-benefit” enterprises. The authors clarify that the government must design an ecostructure that encourages the development of for-benefit enterprises and then rely on society to create their desired world. The main goal of complexity policy is to offer different suggestions when the standard frame cannot. 

Colander and Kupers illustrate that governmental policy in the complexity frame is best viewed as operating in an ecostructure where institutions are designed. This frame aims to foster the creation of an ecostructure that encourages creativity and institutions with bottom-up strategies that include incentives and goals. 

The complexity policy frame falls in between limited and increased governmental intervention. The policy goals in this framework are to reconfigure government structures to protect social wealth, even when it goes into private hands, and make the hard decisions that make policy sustainable. 


4- The Lost Agenda

Colander and Kupers argue that social scientists have not adopted the complexity frame due to the separation of economists, sociologists, political scientists, and psychologists in the beginning stages of education, resulting in the lack of “social scientists.” The authors also say that the separation of various fields resulted in the standard policy frame losing the humanist aspects, and scientists in their subfields view policy differently.

The authors say that complexity science offers the chance to create interdisciplinary social science that includes various fields to interconnect. Colander and Kupers suggest that these five education modules must be included in the common core of a social science program: 

Statistics and Sociometrics Module: this develops literacy in quantitative empirical methods, an understanding of limitations, and the importance of qualitative and quantitative methods, which allow final judgment.

The Modern Game Theory Module: this provides the basics of game theory and modern game theory advances. It requires the incorporation of norms, culture, and class into the analysis. Doing so shows how game theory provides a flexible framework for thinking about social issues without assuming what should happen.

The Complexity and Modeling Module: which gives the students basic intuition of different models, an understanding of where other models should be used or not used, and aggregate and microscopic modeling.

The Philosophical and Methodological Module: This gives students an understanding of social science in different fields and how they developed. This is the only model that includes previous knowledge, which allows students to understand where the current model is needed and not needed. 

The Humanist Module: This is designed to make students aware of the limitations and problems of an analytical social science approach and offer a better understanding of the usefulness of humanistic, literacy, and historical notions of society. The authors state that this model is limited to economics education.

This book covers the intricate details of society, government, and economy within the complexity frame and how it differs from the current frame. The authors focus on how societal issues can be better understood and addressed in complexity science. 

They end the book by promoting an activist laissez-faire approach to policy which can only be accomplished through a complexity framework. They explain that the activist laissez-faire agenda is not new—it is an agenda that has been lost. They conclude that it must be rediscovered to liberate people from the subjugation of the market and government.