In the last quarter century, innovation has consolidated its role as the main factor behind economic growth, and innovation policy as the critical set of incentives that nurtures innovation. Also, the systemic approach, where economic agents have only partial and imperfect knowledge, has gained relevance as opposed to the neoclassical perspective that sees the economy and society as an aggregate of rational individuals maximising their personal welfare. The systemic perspective has flourished on the basis of the work of scholars from different disciplines that analyse the economy as a set of complex adaptive systems. Modelling and simulation replace the approach based on simple equations of known variables. Also in the complex-adaptive systems perspective, small-scale factors have large-scale results (the butterfly effect). Economic systems are adaptive: the system changes its behaviour as a response to the environment. Learning is a form of adaptation to the environment: the system changes its behaviour as a result of its interaction with the environment. The system incorporates some elements from its environment. An analogy would be the plant that climbs and adapts itself to the form of the support it finds.
Developing countries are often slow learners: they modify their response to external changes very gradually. Too often they adopt more efficient organisational patterns and technologies at a leisurely pace. Instantaneous adjustment only occurs in neoclassical models. In the real world, inertia and path dependence as well as slow and tortuous learning processes differ from prompt adjustment and growth.
In addition, following an external shock, systems do not always go back to their previous equilibrium; however, they can attain a new one, several equilibrium states in a row, none or even collapse. The catching up of developing countries – the normal unfolding of human societies according to conventional economics – is far from guaranteed. Instead, catching up is only one possible adaptation of less-developed countries to the changing world economy. Other adaptations may include perpetual backwardness compared to more advanced countries, retrogress or even collapse and disappearance to become regions of larger and more successful nations.
In a nutshell, complexity and the complex adaptive systems (CAS) perspective provide a new and far more fertile, sophisticated and realistic approach to the economic world than conventional neoclassical economics. The economy is not seen in perpetual equilibrium but in continuous change, particularly due to the mutual adaptations of economic agents – individual as well as organisations – with one another. Agents develop strategies, and then change them if they are not successful, or if competition grows. Companies, regions and nations develop new products and new product families, and often neighbours imitate them. Imitation forces the original innovator to change strategies, develop new products or improve them. Often the latecomer becomes the new product – or product-family – leader, forcing the previous leader to innovate or disappear. Thus, perpetual change, but not perpetual stasis, is the substance of macro- and microeconomic analysis. Economic systems are complex adaptive ones, and they must be studied as such.
