Nonlinear Properties, Complexity, and Emergence in the Governance Of the World Trade Organization
AbstractImmediately after World War II the allied powers began what would be a slow march towards a worldwide economic and political order. They established an organization for political and military crises (the United Nations), economic rehabilitation (the International Monetary Fund), facilitation of capital transfers (the World Bank), and promotion of free trade among nations (the World Trade Organization). These organizations did, however, institute (or tried to institute) change from the top down, which reflected the prevailing philosophy of the time. The problem was and is that these organizations ignored inevitable change from the bottom up. The very fact of national sovereignty precluded a top down imposition of a world economic order. Instead, a peculiar interaction has been occurring between this top down rules and bottom up reactions that can best be explained through chaos, or complexity theory. These elements (both nations and international organizations) may be likened to individual units in social space. Each individual unit is influenced both by the surrounding units (i) and by factors in its immediate environment (е). The presence of self-reinforcing (feedback) behavior ensures reverse causality whereby the individual unit influences its environment, which in turn, influences the individual unit. In this system, the total number of inputs equals the total number of elements in the system (i+ е) = N. In a binary system of this magnitude, where N is a large number like the WTO membership (W = 152 countries), chaos is likely to ensue. With nations and international organizations problems may come in two different ways. The first is when N ≤ 2, an ordered system emerges, because the elements have “low connectivity” to inputs. In this, the system withstands small perturbations and returns shortly to its original attractors; this homeostatic property also implies that significant behavioral (or permanent) changes can be achieved only by the introduction of major perturbations in the system. In the same vein, in a system with “high connectivity” order can also emerge if there exist biased “Boolean Switching Rules”. The current movement to worldwide economic order represents the introduction of specific “point attractors” to bring nations into global equilibrium. Unfortunately, these attractors are being introduced from the “top-down” by the wealthiest nations of the world. Hence, despite the presence of such “point attractors” as outlined above, the top-down approach also has the effect of incorporating strange attractors from the local systems. This paper discusses the adaptive complexity of designing and implementing world governance rules to sustain the survival and growth of the WTO. The paper utilizes the methodologies of “adaptive complex systems” and “evolutionary economics” and highlights its arguments by employing clinical studies from the U.S.A. Latin America, and Africa.
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Bibliographic InfoArticle provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.
Volume (Year): 53 (2010)
Issue (Month): 2 ()
Note: Numéro Spécial « Special Issue on Nonlinear Financial Analysis :Editorial Introduction » Guest Editor :Catherine Kyrtsou
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Complexity; Increasing Returns; World Trade Organization; International Monetary Fund;
Find related papers by JEL classification:
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
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