Dealing with complexity in macroeconomics

This presentation is based on a recently published paper in the Cambridge Journal of Economics. This argument contributes to the literature on complexity and macroeconomic models by exploring the analytical relationship and tensions between complex phenomena and macroeconomics. By evaluating the properties of organised complexity, Dr Paniagua suggests alternative strategies for analysing the macroeconomy. Drawing on F. A. Hayek’s notion of organised complexity, he will examine how its causal properties relate to the analytical criteria and assumptions that contemporary macroeconomic models use. The purpose is twofold: first, this argument associates the properties of complexity to the idea of the macroeconomy as an emergent totality arising from the causal interplay between individuals and the organising structure. This conceptually challenges modern macro and frames analytical tensions between complexity and macroeconomic analysis. Second, introducing complexity facilitates breaking away from current analytical and conceptual straitjackets in macroeconomics. Economic inquiry requires looking for alternative ways beyond standard models to analyse the macroeconomy as an emergent totality. This suggests stepping away from current formalistic methods and radical reductionism, in favour of unconventional strategies and approaches that are sensitive to rules, structures, and the causal properties of organised complexity.

Dr Pablo Paniagua is an economist and a Research Fellow at King's College London (KCL). He is also a professor of political economy and director of the Masters in Philosophy, Politics, and Economics program at Universidad del Desarrollo (UDD). He received his PhD in Political Economy from the University of London and his MSc. in Engineering and Finance at Politecnico di Milano. His research engages with broad economic and political questions at the intersection between politics, philosophy, and economics (PPE). He is the author of over thirty articles, essays, and books dealing with various aspects of political economy, philosophy, and the governance of social dilemmas. His work has appeared in journals such as the Cambridge Journal of Economics, Public Choice, and Economy and Society. His latest book, Polycentric Governance and the Good Society, is forthcoming at Rowman & Littlefield.