Butterfly Economics a New General Theory of Social and Economic Behavior

by Paul Ormerod

Book Overview

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.

• Format: Paperback
• Language: English
• ISBN: 0465053564
• ISBN13: 9780465053568
• Release Date: January 2001
• Publisher: Basic Books
• Length: 240 Pages
• Weight: 0.60 lbs.
• Dimensions: 0.6" x 5.3" x 8.0"

Customer Reviews

All that is solid melts into air...

When I left Albion's shores some ten years ago, examination entrants for economics were in decline as A-level students switched to Business Studies in their droves. Economics departments in universities across the British Isles have closed and indeed, in my alma mater (or at least one of them) there are a mere two economists remaining but, as the joke goes, with three opinions between them. I came across Ormerod's book in a reference in a publication by the Institute of Economic Affairs and since receiving it I have scarecly put it down. My first degree is in Economics and prior to completing that degree I had several qualifications in the subject. My specialisma were in the History of Economic Thought and Development Economics but my extra-curriculla activities brought me into contact with the Austrian School mainly through the tremendous work of Ralph Harris and Arthur Seldon at the IEA. The abstraction in modern economics and the tools with which it operates mean that there is often a chasm between the work of the theorists and the realities of life. Too often the forecasts have gone and been forgotten but in hindsight they are often wildly inaccurate. In the United States there has been a lengthy debate throught the intermediary of newspapers such as the Financial Times and others over the discrepancy which exists between the short and long term interest rate in that country which has no explanation according to the current state of theory. Prof. Ormerod does us all a great service in exposing the tottering edifice that is modern economics to criticisms which go back at least one hundred years. There are many voices in the wilderness from Austrians and Institutionalists among others who have shown the inadequacies of the formalist approach but who have been ignored by the vested interests of the economics profession who, like priests of an empty religion, maintain that only the true believer can enter the gates of paradise. Ormerod does great service in opening up some of the basics to this critique in a form which a reasonably educated person may understand. Those working in the field of "Complexity" will know of the difficulties of the mathematical tools in use but which nevertheless have a tremendous applicability in today's world. I resent the description of the text as repetitive. To a degree it has to be if the general public are to keep up with the argument but the same material is not gone over and over again. I suspect that many who are unhappy with this little book have somewhat of a vested interest in maintaining economics as a so-called science, although to me economics resembles light in that whereas light may be viewed as particle or wave, economics may be viewed as science or art. Many who owe economics for their daily bread migght be at risk if Ormerod's work has the validity he claims. What does it profit a man if he gains the whole world but suffers the loss of his own soul? Ormerod's work is a threat to the structure w

A readable analyis of what's wrong with conventional wisdom

There is a massive gap between the predictions of conventional economists and the real world. The economy seen as a gigantic, intricate machine with buttons and levers is the orthodox picture. Economists, and their numerically able cousins the econometricians, expend increasing efforts to develop ever more refined models to try to explain the observations, with diminishing returns. The optimism doesn't diminish. Along comes a book about ants, but called Butterfly Economics. It really is that simple: the agents in economic and other human systems act more like ants than as rational optimisers moving along iso-utility curves. This book demolishes the conventional wisdom that underpins mainstream economics and sketches out the complex adaptive system paradigm which provides a much more accurate picture the world as it really is. Butterfly economics does not attempt chase every rabbit into every hole, but it does establish, very persuasively, that new insights can yield better models to describe aggregate human behaviour. For the intelligent layman this is a great introduction to the exciting results being obtained by researchers in the new science of Complexity.

Readable and Good

I'd like to balance the negative review by "reader from Aiken."He misunderstands the 'Monty Hall' problem. Here's another way to understand it: suppose there were a thousand doors, with a prize behind one. You pick door 1. Of the remaining 999 doors, Monty opens 998 empty doors, leaving (say) door 355 unopened. You now have a choice: open door 1 or door 355. It's obvious when you think about it that the chances of the prize being behind door 355 are much greater.Reader from Aiken's example is flawed because (and this is critical) Monty only uncovers doors that do not have the prize. If door C has the prize, Monty does not uncover it, and then both players know that the prize is behind door C. If door C does not have the prize, then doors A and B do indeed have equal chances of having it.

A new economics, based on complexity.

This is a brilliant successor to Ormerod's previous Death of Economics. It lucidly and wittily demonstrates the fallacy that economic forecasts can predict. More important, it further develops his economic theories based on complexity. His conclusion: "governments should do much less .. detailed short-term intervention .. and [spend more time] thinking about the overall framework.'Ormerod is rare (I am tempted to say unique) among economists. He uses clear and straightforward English - and he has a devastating wit. Assuming that you bring yourself to read books on economics, when was the last time that one caused you to laugh aloud?Butterfly Economics combines clear English, humour and the capacity to translate the realities of human behaviour into a credible explanation of the behaviour of economies. It is very readable, even if you are not really interested in economic theory. The importance of the book and its predecessor is that they provide a better explanation of what is going on than do conventional explanations. It explains why so much of government economic policy produces unintended side effects and it also supports the arguments of Brian Arthur and others that initial inequalities tend to become magnified. Behind the simple explanation is some quite rigorous analysis based on the mathematics of complexity, but this is kept decently in the background for the sake of the general reader.Whereas the primary focus of attack in The Death of Economics was the assumptions underlying 'general equilibrium theory' - the cornerstone of economics and economic policy - Butterfly Economics concentrates on one aspect of human behaviour - choice. It shows what happens when one relaxes the unreal assumption that buyers form their preferences independently and are not influenced by the behaviour of others.

Should be Taught to All Undergraduate Economic Students

Great book. Introduces complicated mathematical concepts through clear concised English that your average layperson can understand. Should be required reading for all undergraduate economic students.