The political economy of complex evolving systems: the case of declining unionization and rising inequalities

This chapter presents an application of the multi-sector labour augmented K+S agent-based model to two contemporary challenges in political economy, namely declining unionization and rising inequality, with reference to mid-term evidence in the US. What has been the effect of declining unionization? We focus, as an example, upon the introduction of legislations such as Right- to-Work (RTW) laws, disfavouring union firms and the way they affected the dynamics of the labour market. The model proves to be a solid and rich tool in order to confront different scenarios emerging out of the interaction of an endogenous dynamic competition between union and non union firms, the latter arriving at a specific time, mimicking the exogenous introduction of RTW laws. The arrival of non union firms induces direct first-order effects, as rising inequality at the workplace and macro level, but also, indirect, second order effects, as lower rates of employment absorption and consumption patterns skewed toward wealthy, luxury consumption goods. In that, complexity economics proves to be a promising avenue to incorporate and confront the grand challenges of contemporary capitalism.