July 18, 2013

Economics and systems theory

Comment on Fred Zaman on 'Rethinking Keynes’ non-Euclidian theory of the economy'


The idea that systems theory could be useful in economics is not as novel as you might think. In fact, it provides the strongest backup for the claim of neoclassicals that what they do is science: “General systems theory (G.S.T.), of which general equilibrium theory is but a specification to certain economic problems, has existed for many years. … G.S.T., then, looks for, and finds, many structural similarities among fields of scientific analysis. To the extent that G.S.T. is a constructive approach to inquiry, general equilibrium theory in economics becomes rooted not just in the particular tradition that have generated the multi-fold extensions of the Arrow-Debreu-McKenzie [ADM] model, but in the very structural unities of science itself. To attack general equilibrium theory in economics as a legitimate model of reasoning is to simultaneously deny homeostatic reasoning to psychologists and morphogenetic analysis to the biologist. To argue that G.S.T. is inapplicable to economics is to negate claims that economics is a science.” (Weintraub, 1979, pp. 71-72)

To propagate systems theory seems not to be the way to a fundamental Paradigm Shift, rather to improve neoclassical systems theory, i.e. to more descriptive realism.

Apart from this, I would like to support your appeal to take systems theory seriously: “Concepts of equilibrium, homeostasis, adjustment, etc., are suitable for the maintenance of systems, but inadequate for the phenomena of change, differentiation, evolution, negentropy, production of improbable states, creativity, building-up of tensions, self-realization, emergence, etc;” (von Bertalanffy, 1969, p. 23)

Systems theorists realized this long ago but equibrilists are still behind the curve.

Egmont Kakarot-Handtke

von Bertalanffy, L. (1969). General Systems Theory. New York: Braziller.
Weintraub, E. R. (1979). Microfoundations. Cambridge, London, New York, etc.: Cambridge University Press.