Paul Ormerod: 21st Century Economics
Substantial advances have been made in economics in the past 20 years. The list of economics Nobel laureates in the 21st century is largely made up of people who have worked outside the traditional Rational Economic Person paradigm of the textbooks.
The lecture will give practical illustrations of the rapid advances which are being made, mainly by scholars outside the discipline of economics itself.
The most important advance is the large amount of work, often drawing on psychology, which tests how people actually behave. The conclusions are a devastating blow to the postulates of the rational, maximising decision maker of conventional economics. In general, people gather limited information, reason poorly, and act intuitively rather than rationally. All scientific theories, even quantum physics which has survived the most rigorous empirical tests, are approximations to reality. The question is in any application: how good is the approximation? In limited circumstances, the conventional economic view of rational behaviour is a good one. But most of the time it is a poor approximation, sometimes very poor. And its use can give seriously misleading views of how the world actually operates.
The challenge of reconstructing economic theory virtually from scratch makes it an exciting time to be an economist.
Paul Ormerod is Director of Volterra Consulting, which he established in 1998 with Bridget Rosewell. He has published 3 best-selling books on economics, which have been translated into many languages. The Death of Economics (1994), Butterfly Economics (1998) and Why Most Things Fail (2005).
This lecture is free to attend and open to all.
It is the first lecture in the Models of the Future public lecture series.