According to Paul Ormerod, author of the
bestselling Butterfly Economics and Why Most
Things Fail, the mechanistic viewpoint of
conventional economics is drastically limited - because
it cannot comprehend the vital nature of networks. As
our societies become ever more dynamic and intertwined,
network effects on every level are increasingly
profound. 'Nudge theory' is popular, but only part of
the answer. To grapple successfully with the current
financial crisis, businesses and politicians need to
grasp the perils and possibilities of Positive
Linking. Our social and economic worlds have been
revolutionised by a massive increase in our awareness of
the choices, decisions, behaviours and opinions of other
people. For the first time in human history, more than
half of us live in cities, and this combined with the
Internet has transformed communications. Network effects
- the fact that a person can and often does decide to
change his or her behaviour simply on the basis of
copying what others do - pervade the modern world.
As Ormerod shows, network effects make conventional
approaches to policy, whether in the public or corporate
sectors, much more likely to fail. But they open up the
possibility of truly 'Positive Linking' - of more
subtle, effective and successful policies, ones which
harness our knowledge of network effects and how they
work in practice.
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