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AbstractConventional 'neoclassical' economics is very useful in understanding how prices are determined but less so as a general basis for understanding the economic behaviour we observe. What is not taken into account is that economic systems are dissipative structures that are complex, but incompletely connected, networks of rules. It is explained why a degree of prior commitment in decision‐making is inevitable in complex economic systems and the implications of this are examined. It is argued that economic analysis must begin with the reality that choices are made in relation to pre‐existing commitments, both with regard to economic structures built in the past and to prevailing systems of belief, when deciding what to do in a future characterised by uncertainty. It is explained how conventional economic incentives can be dealt with in such a complex historical context building upon the neoclassical perspective of Alfred Marshall over a century ago. It is argued that econometric modelling remains viable and useful in understanding behaviour in complex economic systems. It is shown how we can design and interpret time series econometric modelling from a complex systems perspective.

Massively disruptive climate change, now inevitable, is the worst tragedy which human beings have yet brought on themselves. It is tragic in the full classical sense – a disaster entailed on the protagonist (here, humanity) by destructive weaknesses inherent in crucial strengths and virtues. There is thus no way of avoiding it by picking and choosing among our values, and its effects can neither be compensated for nor mitigated by prospective gains to offset against anticipated losses. But once we have discarded a strained and wilful last-ditch optimism, and recognised that we are not in control, we will still need to find genuine hope if we are to have any chance of coming through. This requires us to embrace the transformative power of tragic experience, letting go of values which we may hitherto have regarded as sacrosanct and welcoming the creative destruction of current assumptions and expectations as an affirmation of life.

AbstractOver the past decade, Australian multi‐factor productivity growth has been predominantly negative, often leading to the view that there is a 'productivity problem'. It is shown that it is not a useful measure and is thus misleading. Exploratory econometric investigations suggest that economies of scale are the primary drivers of productivity growth. However, more research needs to be undertaken to understand the determinants of these economies of scale before any new policy to promote productivity growth is designed. There needs to be greater understanding of the underlying process of innovation that gives rise to economies of both scale and scope.

AbstractIn this comment I discuss the excellent contribution of Koppl et al. (2014) to our understanding of the role of institutions in the economic system. Much that is offered by them reinforces and extends previous analysis by institutional and evolutionary economists. However, I argue that there are areas of evolutionary economics and complex economic system analysis that need to be integrated into their evolutionary economic perspective to make it more complete. Also, I argue that they are too kind to mainstream economists who purport to deal with institutions and complexity and that they should consider where the boundaries of science should lie in economics.