Abstract
We have not yet learned how to adapt to modern innovation challenges in the global economy's long cycles and how to govern the associated risks. All the traditional economic theories are too simplistic and do not account for the change in the speeds of global adjustments (esp. financial flows) in the modern digital and knowledge economy. This special analysis reveals that, inadequacies at micro- and macro-levels in the political-economic systems in the global economy cause a new type of crises which cannot be easily contained, let alone prevented, on the strengths of the classical self-correction mechanisms. This new problem is brought about by the speed of capital and information flows in the global (digital) economy. It follows therefore that, on top of new understanding of the real behavior of economic agents (and their dynamic interactions in complex systems), what we need are new institutions that help speed the necessary “processing and digestion” of knowledge to prevent “rubbish in, rubbish out” modeling syndrome, so that policy responses are much better informed and adequate than before. What to make of the new quantities of data and information is a new challenge (knowledge management challenge) that does not lend itself to atomized solutions. On the contrary, new governance supporting institutions are needed. Such knowledge management institutions (e.g. college of macroprudential regulators) would make a very good use of the new understanding of the economic principles (e.g. new agent based paradigms) and, in the longer run (long cycles), would provide less expensive solutions than market excess corrections via new global Great Depression.
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Val Samonis
Val Samonis (MA, PhD, and CPC, [email protected]) has an advanced international education in Engineering, International Management, and Business/Finance, as well as an extensive “hands-on” secular and academic experience spanning different cultures, economic systems, and disciplines.