In Hollywood, William Goldman's famous dictum that
nobody knows anything is accepted as gospel. Nobody can tell you how much a
movie will gross before it's released, no matter how big the stars or
advertising budget. Compare the box-office receipts of two summer-of-'99
horror movies, if you have any doubt about this law: The Blair Witch
Project, with no stars and a small budget, earned far more money than
the very expensive, star-driven The Haunting. Yet, in economics, it's
assumed that everything boils down to an engineering calculation: Maintain
girders A, B, and C, and the roof will never cave in.
Paul Ormerod, author of
The Death of Economics (1994), offers a different idea: "In the
current state of scientific knowledge, it is simply not possible to carry
out forecasts which are systematically accurate over a period of time." The
title Butterfly Economics comes from the idea in chaos theory that a
butterfly flapping its wings here could cause a hurricane on the other side
of the world. It's not that chaos is guaranteed in economics; it's just that
we never know when it'll occur, or what will cause it. "Small changes can
have big consequences, and vice versa," Ormerod notes. His arguments range
far afield. He talks about crime and family structure, biology, fashion, and
many other topics seemingly unrelated to economics. But it comes down to
this: No matter how you analyze it, human behavior is surprisingly random.
And no economic model can account for all of it at any given time.
Butterfly Economics will, of course, be of most use to those with
professional interest in the titular topic (economics, that is, not
butterflies). But anyone seeking a good read on the vagaries of life might
want to give this one a shot. Any author who can analyze the behavior of
ants and Hollywood studio executives in successive breaths deserves a wide
audience. --Lou Schuler --This text refers to an out of
print or unavailable edition of this title.
The New York Times,
It is accessible and even entertaining.... Mr. Ormerod
not only writes about capital, but also points to a way it may at last be
understood. --This text refers to an out of print or unavailable
edition of this title.
From Kirkus Reviews
Ormerod (The Death of Economics, 1995), British economic
theorist for The Economist, seeks to perk up his famously dismal science
with a broader view. His plausible argument is based on the activities of
ants. It seems that if the little beggars are situated between two
equidistant sources of food that are maintained equal in volume their trips
to the comestibles may, at first, appear random. After a while, however, a
pattern emerges, because the behavior of each insect is affected by that of
the insect society. Extrapolating to a higher order, Ormerod find analogies
in voting patterns, and propensity to disease, crime, and marriage, and
thence proceeds from matters uxorious to economic and econometric models
used to devise national policy. Even if it may cause a tornado, as is
sometimes reported, the flight of a butterfly on the other side of the world
is the sort of microactivity that's difficult to quantify usefully. Look for
the larger patterns and do not base policy on ephemera, Ormerod advises.
Shifts in supply and demand, human tastes and preferences, are operative and
not fixed, as conventional economic models predict. Classical economists
like Ricardo and Keynes, without current analytical tools, were obliged to
look at communities taken as a whole. Governments, says Ormerod, ``should do
very much less in terms of detailed, short-term intervention. Close
inspection of the ants may not change their activities; but, a reader may
ask, will the published observations of the econometricians invoke
Heisenberg's Uncertainty Principle and alter human economic activity?
Ormerods writing, supplemented with mathematical examples, charts, and
diagrams, is lucid, with touches of humor. The technical appendices and
occasional footnote memorializing such things as ``the ordered eigenvalues
of the covariance matrix of a delay matrix'' may be safely ignored. ``Go to
the ant, thou economist; consider her ways and be wise'' is a new proverb
that may be good advice to astute policy makers who study this skillful,
worthwhile tract. -- Copyright ©1999, Kirkus Associates, LP. All rights
reserved. --This text refers to an out of print or unavailable
edition of this title.
"Ormerod's writing is lucid, with touches of humor."
"... amusingly written, and every page offers surprising
facts or strikingly new ways of looking at well-known facts."
A beautifully written and engaging look at the cutting
edge where economics meets complexity theory In this cogently and elegantly
argued analysis of why human beings persist in engaging in behavior that
defies time-honored economic theory, Ormerod also explains why governments
and industries throughout the world must completely reconfigure their
traditional methods of economic forecasting if they are to succeed and
prosper in an increasingly complicated global marketplace.
"It is accessible and even entertaining. . . Mr. Ormerod not only writes
about capital, but also points to a way it may at last be understood." -New
(Pantheon Books. Perseus Books) Presents a new theory of
economics that suggests that the key to economic prosperity is to alter the
theory from a 'hard science' theory to one less dependent on 'laws' and
'forces' and more open to social factors. Suggests that economics is as
unpredictable as fashion trends. Softcover. DLC: Economic policy.
From the Back Cover
"If you're looking for a fascinating, entertaining
introduction to twenty-first century economics, here's an excellent starting
place. You'll learn more here about the way real economies work than by
reading a bookshelf of academic tomes. And you'll have fun along the way."
-- The New Scientist --This text refers to an out of print
or unavailable edition of this title.
About the Author
Paul Ormerod has been head of the Economic Assessment
Unit at The Economist and a visiting professor at the Universities of London
and Manchester. He lives in London.