ABSTRACT
A complete treatment of complexity would be far outside the boundaries of the present chapter. Here a limited number of considerations about complexity will be used to introduce the subject. A complex system is constituted by its components and by their interactions. The set of components and interactions of a given system constitutes its structure. One of the most important stylized facts about the evolution of biological and socio-economic systems is the existence in them of a structure and the fact that such a structure can undergo changes in the course of time. Some of these are
qualitative changes since they involve the emergence of new entities and constitute discontinuities. For example, in the period following the industrial revolution many new types of artefacts and of human activities not comparable to those which existed before came into being. Examples of the former are cars, computers, and aeroplanes and of the latter research and development, venture capital firms and, of course, all the activities required to produce the new types of artefacts. These are important changes in the structure of the economic system, which we can call structural changes. The term structural change has in the past been used in a more restricted sense in economics, referring to the changing balance of different economic sectors. In the context of a complexity based approach the term can be used in a more general sense as describing any changes in the structure of the system. Examples of these changes are (a) the emergence of new components or the extinction of older ones, (b) the emergence of new interactions or the extinction of older ones, (c) the changing nature of any existing component, (d) a change in the interaction of existing components. Clearly such a definition of structural change encompasses the emergence of new institutions, of organizational forms and of new scientific disciplines. For example, the emergence of a new discipline constitutes an example of structural change in science, which can induce structural change in the economy by leading to the creation of new industrial sectors. The long run evolution of capitalist societies has been characterized by important discontinuities. The transition from feudal to bourgeois society and the industrial revolution are just examples of such discontinuities. A theory of economic development must be able to account for these changes, that is, to explain why and how they took place. Complexity based approaches can in principle be the basis for an explanation since they can predict both the emergence and the changes in the structure of complex systems giving rise to phase transitions and to transformations involving discontinuities. The term complexity based approaches has been used here because, as already pointed out, there is no complete and consensually accepted treatment of complexity. In what follows some of the most crucial concepts of complexity will be outlined here and used in the subsequent analysis. Two related concepts involved in the emergence of complex behaviour are those of feedback and of autocatalysis (Allen 2007, Nicolis and Prigogine 1989). Feedback occurs when a component A of a system is both affected by and affecting another component B. In this case any change in A leads to a change in B which then leads to a further change in A. Autocatalysis occurs when the output of a given process is also one of its inputs. Nicolis and Prigogine (1977) showed that the feedback occurring in a chemical reaction called Brusselator can give rise to the emergence of structure in a previously homogeneous system. In principle feedback and autocatalysis can lead to the emergence and to changes of structure in any type of system, including biological and socio-economic ones. However, feedback does not operate according to the same mechanism in these different types of systems. While all molecules corresponding to a chemical formula can in principle be considered equivalent, the members of a biological or socio-economic population cannot. The essential difference consists in the presence of microdiversity in
biological and socio-economic systems (Allen 2007). The competitive interactions between different biological species affect preferentially the weakest members of each population, thus influencing the fitness of each interacting population. A further change occurs when passing from biological to socio-economic systems. In this case not only inter-population interactions affect differentially the weakest members of each population but learning and strategy change can take place leading to changes in the nature of system components. This situation shows one of the basic features of complexity based approaches: there is a level of generality at which statements can be made about any system, but the detailed behaviour of any system can only be predicted by taking into account the specific features of the system. In summary, feedback and autocatalysis can lead to structural change in socio-economic systems. As new components emerge they have to self-organize themselves into relatively stable and coherent new structures. Another important feature of socio-economic systems is that they never settle on any permanent structure, although some system structures can be relatively stable and persist for long periods. In other words, as Arthur (2007) points out, in a socio-economic system there cannot be any general equilibrium. Socioeconomic systems have a tendency to transform themselves, where the term transformation implies the possibility of qualitative change (Saviotti 2007) represented by the emergence of new types of system components or by new types of interactions giving rise to new structures.
