Alan Kirrman (Aix Marseille Université, and EHESS)
Abstract. Over the last two centuries there has been a convergence albeit a painful onein Western societies on the desirability of leaving as much freedom of choice as possible to the individual. This underlying tenet of liberalism has been the force that has led economics to evolve in the way that it has. Implicit is the idea that, by allowing individuals the liberty of choice, the economy will self organise into a state which has a number of desirable properties. In particular, economic theory, has, moved to the position that markets, in which individuals are left to their own devices will self organise into an equilibrium and we have shown that such equilibria have desirable social welfare properties. However the Achilles heel of modern economic theory is the problem of stability. By insisting on studying the properties of equilibrium states without being able to show that an economy would ever arrive in such a state, we have put to one side what is possibly the most important problem in economics. One escape route, used by macroeconomists, has been to assume that the economy is always in equilibrium but, by avoiding the analysis of its out of equilibrium characteristics, we are doomed to fail to account for endogenous crises. An inspection of historical writings on this subject shows that our predecessors were well aware of this problem, Hayek argued that spontaneous order would emerge were there no interference from the state Debreu thought that the task of showing any such property was impossible. However, treating the economy as a complex adaptive system, an idea that which also has long historical roots, may help to resolve the question, but the sort of evolution that would be consistent with such a view, is far from the simple convergence to equilibrium usually assumed. Unfortunately, taking such a view may finally destroy the hope, made explicit by Walras, that one day economics would be a science in the same category as astrophysics. Worse, it may, lead us to be much more modest in our policy recommendations and to accept Mervyn King the ex governor of the Bank of England's assertion that "we should avoid the hubris of thinking that we understand how the economy works, Just as we should avoid the hubris of thinking that leaving markets to their own devices will lead to nirvana."