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

Listed author(s):
  • Wolfram Elsner

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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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
DOI: 10.1080/00346760500047909
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  1. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
  2. 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.
  3. Ritzberger, Klaus, 2002. "Foundations of Non-Cooperative Game Theory," OUP Catalogue, Oxford University Press, number 9780199247868.
  4. 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 817-833, December.
  5. Perraton, Jonathan, 2001. "The Global Economy--Myths and Realities: Review Article," Cambridge Journal of Economics, Oxford University Press, vol. 25(5), pages 669-684, September.
  6. John Accordino & Wolfram Elsner, 2000. "Conversion Planning in Two Military Shipbuilding Regions: Hampton Roads, Virginia, and Bremen, Germany," International Regional Science Review, , vol. 23(1), pages 48-65, January.
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