Why Herbert Simon Matters for Policymaking

Article
  • 22 Downloads

Abstract

The OECD created its New Approaches to Economic Challenges Initiative (NAEC) in 2012 to improve the understanding of the complex and interconnected nature of the global economy in order to provide better policy advice to the Organisation’s member governments. Contributors to NAEC call on Herbert Simon’s insights in their analyses of the economy in general as a complex system, and in particular when explaining the financial system and the dynamics of crises. In addition to underpinning much of the later work on complexity, Simon’s “bounded rationality” provides a strong critique of “modern” behavioural economics that remains in essence within the orthodox neoclassical framework of optimisation under constraints. Simon was prescient in tackling a number of issues that policymakers are now facing, including the role of expertise and populism in democratic systems; “ill-structured” problems such as climate change or trade protectionism; and how the information age would lead to a scarcity of attention. The OECD owes a particular debt to Herbert Simon because of his involvement in the Marshall Plan, in which the OECD had its origins.

Keywords

Herbert Simon Policy making Complexity Social media Behavioural economics OECD Financial crisis 

References

  1. Astolfi, R., et al. (2016). The use of short-term indicators and survey data for predicting turning points in economic activity: A performance analysis of the OECD system of CLIs during the Great Recession. In OECD Statistics Working Papers, No. 2016/08. OECD Publishing, Paris.  https://doi.org/10.1787/5jlz4gs2pkhf-en.
  2. Batie, S. S. (2008). Wicked problems and applied economics. American Journal of Agricultural Economics, 90, 1176–1191.  https://doi.org/10.1111/j.1467-8276.2008.01202.x.CrossRefGoogle Scholar
  3. Blundell-Wignal, A. (2017). A complex global financial system. In P. Love & J. Stockdale-Otárola (Eds.), Debate the issues: Complexity and policy making. Paris: OECD Publishing.  https://doi.org/10.1787/9789264271531-en.Google Scholar
  4. Bookstaber, R. (2011). Human complexity: The strategic game of ? and ? http://rick.bookstaber.com/2011/03/human-complexity-strategic-game-of-and_25.html. Accessed 7 Feb 2018
  5. Bookstaber, R. (2017). The end of theory: Financial crises, the failure of economics, and the sweep of human interaction. Princeton: Princeton University Press.CrossRefGoogle Scholar
  6. Davenport, T. H., & Beck, J. (2001). The attention economy: Understanding the new currency of business. Boston: Harvard Business School Press.Google Scholar
  7. Garicano, L. (2008). I did not stammer when the Queen asked me about the meltdown, Guardian, November 18, 2008, https://www.theguardian.com/commentisfree/2008/nov/18/response-credit-crisis-economy-response. Accessed 7 Feb 2018
  8. Gramsci, A. (1971). Selections from the prison notebooks (G. N. Smith, Q. Hoare, Trans.). New York: International Publishers.Google Scholar
  9. Haldane, A. (2017). From economic crisis to crisis in economics. In P. Love & J. Stockdale-Otárola (Eds.), Debate the issues: Complexity and policy making. Paris: OECD Publishing.  https://doi.org/10.1787/9789264271531-en.Google Scholar
  10. Husserl, E. (1970). The crisis of European sciences and transcendental phenomenology: An introduction to phenomenological philosophy (translated by D. Carr, Trans.. Evanston: Northwestern University Press.Google Scholar
  11. Kirman, A. (2017). Complexity and economic policy. In P. Love & J. Stockdale-Otárola (Eds.), Debate the Issues: Complexity and policy making. Paris: OECD Publishing.  https://doi.org/10.1787/9789264271531-en.Google Scholar
  12. Laclau, E. (1996). Why do empty signifiers matter to politics? In E. Laclau (Ed.), Emancipation(s) (pp. 34–46). London: Verso.Google Scholar
  13. Lo, A. W. (2017). Adaptive markets: Financial evolution at the speed of thought. Princeton: Princeton University Press.Google Scholar
  14. Lo, A. W. (2004). The adaptive markets hypothesis: Market efficiency from an evolutionary perspective. The Journal of Portfolio Management, 30(5), 15–29.  https://doi.org/10.3905/jpm.2004.442611.CrossRefGoogle Scholar
  15. Margolis, H. (1982). Selfishness, altruism, and rationality. Cambridge: Cambridge University Press.Google Scholar
  16. OECD. (2003). Emerging risks in the 21st century: An agenda for action. Paris: OECD Publishing.  https://doi.org/10.1787/9789264101227-en.Google Scholar
  17. OECD. (2007a). OECD economic outlook (Vol. 2007, No. 1). Paris: OECD Publishing.  https://doi.org/10.1787/ecooutlook-v2007-1-en.
  18. OECD. (2007b). Update on financial market developments. In Financial Market Trends (Vol. 2007, No. )1.  https://doi.org/10.1787/fmt-v2007-art2-en.
  19. Ridley, C. E., & Simon, H. A. (1937). Technique of appraising standards. Public Management, 19(2), 46–49.Google Scholar
  20. Rosefielde, S. (2017). Trump’s Populist America. Hackensack: World Scientific.CrossRefGoogle Scholar
  21. Schultz, J. (2017). How much data is created on the internet each day? Micro Focus Blog, October 10, 2017, https://blog.microfocus.com/how-much-data-is-created-on-the-internet-each-day/. Accessed 7 Feb 2018
  22. Simon, H. A. (1971). Designing organizations for an information-rich world. In M. Greenberger (Ed.), Computers, communication, and the public interest (pp. 40–41). Baltimore: The Johns Hopkins Press.Google Scholar
  23. Simon, H. A., et al. (1986). Decision making and problem solving. In Report of the Research Briefing Panel on Decision Making and Problem Solving. Washington, DC: National Academy Press.Google Scholar
  24. Simon, H. A. (1997). Administrative behavior, 4th edition: A study of decision-making processes in administrative organisation. New York: Free Press.Google Scholar
  25. Trichet, J.-C. (2017). Lessons from the economic and financial crisis. Is global finance still vulnerable? New Approaches to Economic Challenges Seminar, OECD, Paris, November 17, 2017, http://oecdtv.webtv-solution.com/4105/or/general_secretariat_naec_seminar_with_jean_claude_trichet.html. Accessed 7 Feb 2018
  26. Velupillai, V. (2014). Economics’ massive magnet. OECD Insights, March 13, 2014, http://oecdinsights.org/2014/03/13/economics-massive-magnet/. Accessed 7 Feb 2018
  27. White, W. (2017). Recognizing the economy as a complex, adaptive system: Implications for Central Banks, www.williamwhite.ca/sites/default/files/CAEGChapterRevised.pdf. Accessed 7 Feb 2018
  28. Zaman, A., & Karacuka, M. (2012). The empirical evidence against neoclassical utility theory: A review of the literature. International Journal of Pluralism and Economics Education, 3(4), 366–414.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Office of the Secretary-General of the OECDParisFrance

Personalised recommendations