Induction, complexity, and economic methodology

This paper focuses on induction, because the supposed weaknesses of that process are the main reason for favouring falsificationism, which plays an important part in scientific methodology generally; the paper is part of a wider study of economic methodology. The standard objections to, and paradoxes of, induction are reviewed, and this leads to the conclusion that the supposed ‘problem’ or ‘riddle’ of induction is a false one. It is an artefact of two assumptions: that the classic two-valued logic (CL) is appropriate for the contexts in which induction is relevant; and that it is the touchstone of rational thought. The status accorded to CL is the result of historical and cultural factors. The material we need to reason about falls into four distinct domains; these are explored in turn, while progressively relaxing the restrictions that are essential to the valid application of CL. The restrictions include the requirement for a pre-existing, independently-guaranteed classification, into which we can fit all new cases with certainty; and non-ambiguous relationships between antecedents and consequents. Natural kinds, determined by the existence of complex entities whose characteristics cannot be unbundled and altered in a piecemeal, arbitrary fashion, play an important part in the review; so also does fuzzy logic (FL). These are used to resolve two famous paradoxes about induction (the grue and raven paradoxes); and the case for believing that conventional logic is a subset of fuzzy logic is outlined. The latter disposes of all questions of justifying induction deductively. The concept of problem structure is used as the basis for a structured concept of rationality that is appropriate to all four of the domains mentioned above. The rehabilitation of induction supports an alternative definition of science: that it is the business of developing networks of contrastive, constitutive explanations of reproducible, inter-subjective (‘objective’) data. Social and psychological obstacles ensure the progress of science is slow and convoluted; however, the relativist arguments against such a project are rejected.induction; economics; methodology; complexity

Complexity Thinking and Evolutionary Economic Geography

Thus far, most of the work towards the construction of an evolutionary economic geography has drawn upon a particular version of evolutionary economics, namely the Nelson-Winter framework, which blends Darwinian concepts and metaphors (especially variety, selection, novelty and inheritance) and elements of a behavioural theory of the firm. Much less attention has been directed to an alternative conception based on complexity theory, yet in recent years complexity theory has increasingly been concerned with the general attributes of evolutionary natural and social systems. In this paper we explore the idea of the economic landscape as a complex adaptive system. We identify several key notions of what is being called the new ‘complexity economics’, and examine whether and in what ways these can be used to help inform an evolutionary perspective for understanding the uneven development and adaptive transformation of the economic landscape.complexity theory, evolution, economic landscape, networks, emergence, regional adaptation

Quantifying China's Regional Economic Complexity

China has experienced an outstanding economic expansion during the past decades, however, literature on non-monetary metrics that reveal the status of China's regional economic development are still lacking. In this paper, we fill this gap by quantifying the economic complexity of China's provinces through analyzing 25 years' firm data. First, we estimate the regional economic complexity index (ECI), and show that the overall time evolution of provinces' ECI is relatively stable and slow. Then, after linking ECI to the economic development and the income inequality, we find that the explanatory power of ECI is positive for the former but negative for the latter. Next, we compare different measures of economic diversity and explore their relationships with monetary macroeconomic indicators. Results show that the ECI index and the non-linear iteration based Fitness index are comparative, and they both have stronger explanatory power than other benchmark measures. Further multivariate regressions suggest the robustness of our results after controlling other socioeconomic factors. Our work moves forward a step towards better understanding China's regional economic development and non-monetary macroeconomic indicators.Comment: 14 pages, 6 figures, 1 tabl

Economic integration and export complexity: the case of Slovakia

The goal of the article is to evaluate the impact of the European Union (EU) accession on the complexity of goods in Slovak exports. The traditional theories or trade (Ricardian and Heckscher-Ohlin models) show that such an engagement in economic integration may lead to specialization in the production of either more or less sophisticated goods, depending on the country’s technological advancement and factor endowment. At the same time, increased FDI flows may stimulate the engagement of a country in international production chains with ambiguous effects on export complexity. Because it is impossible to a priori predict the effect economic integration may have on the complexity, it is reasonable to verify it empirically. The authors used the Synthetic Control Method (SCM) to compare the observed post-accession levels of exports complexity in Slovakia with the counterfactual values of that country remaining outside of the EU. The obtained results show that the accession led to an increase in complexity of exported goods