Economic Growth, Complexity, and Institutional Conflicts

Abstract

AbstractGrowth of complexity and economic growth, especially the growth of productivity, is inseparable and interconnected. Not only is specialization a form of complexity, especially the information space of our society and thus of our economy, is becoming more complex. Workers (labor relations) and consumers become more complex as do some products and services. So are markets and industries. Traditional managerial responses to complexity, especially increased bureaucracy, fall short to deal with the new complexity, as do romantic concepts of complexity. The concept of intelligent complex adaptive system (Bennett & Bennett) is introduced in this chapter. Its original descriptive presentation is commented and is linked to a number of concrete administrative instruments, to overcome the intuitive nature of its original description. Traditionally the problem of complexity, as induced by limitations in education and communication, was curbed by a number of institutions, including typical trade and business institutions. The successful management books of the twentieth century used to be not only based on economic thinking, but especially in making people to act, based on the art of making things seem true, not on understanding new complexities. This worked well in the era of institutional simplification. The friction between the economic need for a higher complexity and the suppressing of complexity by institutions, as laws, regulations, conventions, and conventional business concepts, was answered by the liberalization of markets and a reduced role of the state. The knowledge base, individual, collectively and especially institutional, does not keep up with the increase of complexity, resulting in a number of disasters, failures and immoral behavior. In society, this was responded to with risk management and re-regulation. The perception of a risk society nestled itself in society. But as concepts and tools of risk management often are based on concepts dating back to the modern era, their underlying assumptions don’t fit the present time, and risk management paradoxically has become a source of risk itself in a complex society. This chapter presents a conceptual model for economic complexity, demonstrating that re-regulation is no answer to complexity, neither are the popular narratives in management books, nor the flight into culture to “explain” everything, because what is needed is a new administrative technicality.