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Real-World Economics Today:The New Complexity, Co-ordination and Policy

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  • Wolfram Elsner
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    Abstract

    More realistic economics has to start out from the most basic socio-economic phenomena and processes, i.e. dilemma-prone interdependencies and strong uncertainty among agents that have become ubiquitous phenomena in the world today. In the reality of the “new” economy these are represented by functional and spatial fragmentation of value-added chains, global de-regulation and disembedding of the most powerful economic agents, on one hand, and increasing complexity and high integration of goods and services and net-based tele-IC-technologies on the other hand. All these rather new phenomena entail ubiquitous actual or potential co-ordination failure, either in the form of conventional “market failure”, with a complete mutual blockage of action, or of “wrong” co-ordination, or technological “lock-in”. Both forms are indicative of an insufficient capacity of the co-ordinated action required. In contrast, capability of sustainable innovative action in a broad sense requires new forms of co-ordination beyond “market” and “hierarchy”. Economics thus has to be defined more than ever as a science of effective co-ordination and the generation of innovative and sustainable collective action capacity. The global corporate economy has developed individualist arrangements to cope with that new co-ordination problem, such as local clusters and hub&spoke networks, which all have severe shortcomings. Against this background, the paper develops a setting with ubiquitous direct interdependencies, net-externalities, “strategic” strong uncertainty and ubiquitous (latent) social-dilemma problems. It discusses the possibility of an ideal decentralized and spontaneous co-ordination through emergent institutionalized collective action, specifically of “well-governed” network co-operation. In conclusion, it is argued that only a hybrid system of networks together with a new public policy role, supporting collective learning and emergent institutional co-ordination, i.e. an “interactive” and “institutional” policy approach, is capable of solving the co-ordination problems of the “new” economy.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00346760500047909
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Review of Social Economy.

    Volume (Year): 63 (2005)
    Issue (Month): 1 ()
    Pages: 19-53

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    Handle: RePEc:taf:rsocec:v:63:y:2005:i:1:p:19-53

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    Related research

    Keywords: complexity; co-ordination; co-operation; evolution; governance; information; information society; interaction; institutions; “interactive policy”; local clustering; networks; “new economy”; Prisoners' Dilemma;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Perraton, Jonathan, 2001. "The Global Economy--Myths and Realities: Review Article," Cambridge Journal of Economics, Oxford University Press, vol. 25(5), pages 669-84, September.
    2. Breschi, Stefano & Malerba, Franco, 2001. "The Geography of Innovation and Economic Clustering: Some Introductory Notes," Industrial and Corporate Change, Oxford University Press, vol. 10(4), pages 817-33, December.
    3. Drew Fudenberg & David K. Levine, 1998. "Learning in Games," Levine's Working Paper Archive 2222, David K. Levine.
    4. Tiziana Casciaro, 2003. "Determinants of governance structure in alliances: the role of strategic, task and partner uncertainties," Industrial and Corporate Change, Oxford University Press, vol. 12(6), pages 1223-1251, December.
    5. Ritzberger, Klaus, 2002. "Foundations of Non-Cooperative Game Theory," OUP Catalogue, Oxford University Press, number 9780199247868.
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    Cited by:
    1. Elsner, Wolfram & Heinrich, Torsten, 2009. "A simple theory of 'meso'. On the co-evolution of institutions and platform size--With an application to varieties of capitalism and 'medium-sized' countries," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 843-858, October.
    2. Elsner, Wolfram & Hocker, Gero & Schwardt, Henning, 2009. "Simplistic vs. Complex Organization: Markets, Hierarchies, and Networks in an 'Organizational Triangle'," MPRA Paper 14315, University Library of Munich, Germany.

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