W. Brian Arthur on Economics in Nouns and Verbs

What is the economy?  People used to tell stories about the exchange of goods and services in terms of flows and processes — but over the last few hundred years, economic theory veered toward measuring discrete amounts of objects.  Why?  The change has less to do with the objective nature of economies and more to do with what tools theorists had available.  And scientific instruments — be they material technologies or concepts — don’t just make new things visible, but also hide things in new blind spots.  For instance, algebra does very well with ratios and quantities…but fails to properly address what markets do: how innovation works, where value comes from, and how economic actors navigate (and change) a fundamentally uncertain shifting landscape.  With the advent of computers, new opportunities emerge to study that which cannot be contained in an equation. Using algorithms, scientists can formalize complex behaviors – and thinking economics in both nouns and verbs provides a more complete and useful stereoscopic view of what we are and do.

This week we speak with W. Brian Arthur of The Santa Fe Institute, Stanford University, and Xerox PARC about his recent essay, “Economics in Nouns and Verbs.” In this first part of a two-part conversation, we explore how a mathematics of static objects fails to describe economies in motion — and how a process-based approach can fill gaps in our understanding.

Listen (Part 1) at: complexity.simplecast.com

Also, listen to Part 2 on “Prim Dreams of Order vs. Messy Vitality” in Economics, Math, and Physics