One thing I would note is that complexity analysis doesn’t tell us when something happens – it just provides a motivation for seeing that something was a risk. Prior to the crisis, even mainstream economists believed that the stock of debt was out of line with eqm – but given this we believed that there would be policy responses that would prevent the adjustment being sharp. In this we were wrong 😉

I’d also note that there are probably more similarities between that and multiple equilibrium analysis than meets the eye 😉

Multiple eqm, complexity theory, and arguments from aggregates (holistic arguments) all point to a situation where reductionism doesn’t tell us the whole story for a given question. The reason economists often avoid these arguments is that they like to see how far they can get with methodological individualism first. In truth, we should be able to compare explanations from methodological individualism with other explanations – and then ask which is more likely by comparing underlying assumptions. The this shows why economists are so nervous – often they feel that the underlying assumptions given these types of explanations are unclear (or “ad hoc” as people like to say) … and as a result, we cannot compare or form policy based on structural arguments.

It is a frikken interesting issue, which I think indicates the limits of our knowledge, and the way that macroeconomics is inherently different to other forms of economics in a methodological sense.