As a young magazine writer, I was a quick enough study to recognize that, in the discussion of inflation, the bourgeoning enthusiasm for monetary analysis had loaded the dice in favor of the quantity theory of money. New World treasure, paper money, central banking: it was as if monetary policy was a force independent of whatever might be happening in the economy itself. It reminded me a famous New Yorker cartoon, a patient talking to his psychoanalyst: “Gold was at $34 when my father died… it was $44 when I married my wife… now it’s $28, but I have trouble seeing.”
I wanted to suggest a variable that might represent the perspective of real analysis, though I did not yet know the term: the conviction, as I learned Joseph Schumpeter had described it, that “all the essential phenomena of economic life are capable of being described in terms of goods and services, of decisions about them, and relations between them,” and that money entered the picture as just another a technological device. Thinking about all else besides monetary innovation that was new in the world since the fifteenth century, I came up with a catch-word to escribe what had changed. The Idea of Economic Complexity (Viking) appeared in 1984.
It certainly wasn’t theory: more in the nature of criticism, a slogan with so little connection to the discourse of economics since Adam Smith that it didn’t bother specifying complexity of what. But the word had an undeniable appeal. “Complexity,” I wrote, “is an idea on the tip of the modern tongue.”
Sure enough: Chaos: Making a New Science, by James Gleick, appeared in 1987; Complexity: The Emerging Science at the Edge of Chaos and Order, by M. Mitchel Waldrop; and Complexity: Life at the Edge of Chaos, by Roger Lewin, followed in 1992; and in the next decade, a whole shelf of books appeared, of which The Origin of Wealth: Evolution, Complexity, and the Remaking of Economics, by Eric Beinhocker, in 2006, was probably the most interesting.
But the question remained: complexity of what? The long quote-box on the back of the book jacket had put it this way:
To be complex is to consist of two or more separable, analyzable parts, so the degree of complexity of an economy consists of the number of different kinds of jobs in the system and the manner of their organization and interdependence in firms, industries, and so forth. Economic complexity is reflected, crudely, in the Yellow Pages, by occupation dictionaries, and by standard industrial classification (SIC) codes. It can be measured by sophisticate modern techniques, such a graph theory or automata theory. The whys and wherefores of our subject are not our subject here, however. It is with the idea itself that we are concerned. A high degree of complexity is what hits you in the face in a walk across New York City; it is what is missing in Dubuque, Iowa. A higher degree of specialization and interdependence – not merely more money or greater wealth – is what make the world of 1984 so different from the world of 1939.
Fair enough, for purposes of journalism. There was however something missing in my discussion: to wit, any real knowledge of structure of technical economic thought. I had come across the economist Allyn Young (1876-1929) in my reading, a little-remembered contemporary of Irving Fisher, Wesley Clair Mitchel, and Thorstein Veblen, Schumpeter, and John Maynrd Keynes. I classified him, with Schumpeter, as a “supply-sider,” in keeping with the controversies of the early Eighties, “locating in the businessman’s entrepreneurial search for markets the most profound impulse toward economic growth.” I added only that “We are coming at it from a slightly different direction is this book.”