This is the second of two contributed pieces by Paul Ormerod, the author of Positive Linking and, as I noted in my last post, in my opinion the most effective developer of multi-agent models of the economy.
Did Economists Go Mad? Networks and the Economic Crisis
The conduct of economic policy making over the ten to fifteen years prior to the financial crisis of 2008–9 exemplifies the fundamental problems of the conventional mindset of economics. At the time, it seemed as though clever policy makers devising clever rules and regulations to set the right incentives, to which economically rational agents would respond appropriately, had indeed solved key problems of macroeconomic management. Economic growth in the West was strong and steady, and both unemployment and inflation everywhere remained low.