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Alternative Policies after the Financial Crisis:New Thinking from Complex Evolutionary Economics

Abstract

The 2008 financial crisis shocked the equilibrium paradigm of neoclassical economics. According to the efficient market hypothesis and rational expectation theory, there is little possibility for a market crisis under the “invisible hand” of a self-stabilizing market. The disequilibrium school emphasizes the destabilizing effect of herd behavior, but falls short in policy recommendations if markets are governed by fat tail, fractal, unit root, power law, or Black Swan models. The study of economic complexity greatly extends our scope to nonlinear and non-equilibrium mechanism in economic dynamics.

In this article, we will first study the origin and nature of the crisis that reveals the fundamental flaws in neoclassical economics and requires a paradigm change in economic thinking. Then, we will discuss alternative policies in complex evolutionary economics, which is capable of understanding the changing world after the crisis.

Alternative Policies after the Financial Crisis:New Thinking from Complex Evolutionary Economics

 

 

 

 

 

 

 

 

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