Blog: Will the Markets Lose Complexity?
Political constraints may make markets less adaptable and resilient.
Free markets are now generally considered complex systems. In this vein a free market has more similarity to a natural system, like the weather (hence the FMCR Climatology Model), than a machine, like a clock. This distinction is important because clockwork mechanisms can easily break down if one part of the machine stops functioning. A complex system, on the other hand, is capable of adapting to change and evolving if the change is permanent because it is decentralized.
But is it possible for a complex system to lose this adaptive capability? The answer is, yes. While there are many ways this can happen, one we should be concerned with here is a loss in complexity itself.
In recent months we've seen a shift in the US from a free market mentality to one that favors a form of state capitalism and other forms of governmental restraint. While this is still in the early stages, if it continues it is very possible that the markets will become less complex and so, less adaptive to change. Then it would be possible for a "strong" economy to collapse in the face of change.