FORA.tv - The Debt Crisis: Is Democracy the Problem?

As voters continue to demand short-term solutions to the long-term problem of government debt (and as politicians continue to oblige them), international economist Dambisa Moyo ponders the question: Is democracy itself part of the problem?

In January 2009, in the immediate aftermath of the credit crunch, the physicist and hedge fund manager J.P. Bouchaud wrote in the pages of Nature that Economics needs a scientific revolution . Economyths is an attempt to spell out what such a revolution might look like, and document the exciting developments taking place in economics.

It too is written from an outsider perspective - that of an applied mathematician, working mostly in the area of computational biology. Many of the techniques used in that field, such as network theory and agent-based modelling, are beginning to find widespread applications in economics. But the assumptions they are based on are completely different from those of mainstream economics.

So-called heterodox economists have long questioned the assumptions behind mainstream economics. But following the credit crunch, there has been an even more concerted effort to develop alternative models which can address issues such as economic inequality, environmental sustainability, human wellbeing, and financial instability. Many of the new ideas are coming from areas of applied mathematics such as nonlinear dynamics, complexity, and network theory.

Another rich source of new ideas is those other life sciences, biology and ecology. The ecologist Robert May recently joined forces with the Bank of England's Andrew Haldane to analyse the financial network from a systems perspective. They found that risk metrics used for individual institutions such as banks fail to account for systemic risk. And even if we cannot predict the exact timing of the next financial crisis any better than we could the last one, at least we can learn how to make the system more robust in the first place.