Journal on Policy & Complex Systems Volume 4, Number 1, Spring 2018 | Page 169

Journal on Policy and Complex Systems

free traders , the differences between central planning and free markets are not so easily identified . In the tangled order of today , many layers of connections exist between liberal and illiberal polities . China , for example , embraces classical liberalism ’ s ideal of complex economic interdependence , yet its internal policies are at variance with the social norms and rules that are generally associated with a free economy .

Economic development attained through trade and investment has enabled greater political repression and a closed political system

Introducing The Road to Serfdom ’ s fiftieth-anniversary printing in 1994 , Milton Freedom wrote that “ the free market is the only mechanism that has ever been discovered for achieving participatory democracy ” ( Hayek , 1994 ). But the powerhouse economies of China and Singapore suggest instead that the connection between economic and political liberty is far more complex , and that it is not possible to predict the existence of one form of liberalism from the observation of the other .

pockets . Yet he doubted that there is an optimal move , and feared that uncertainty could become wildly contagious and self-reinforcing as it spread from one market participant to another . He could never have been persuaded that rational beliefs drive markets to equilibrium . In his world , the players in the market are not only unable to accurately know what the state of the world is , they could not know what other traders knew . Thus they are compelled to act on the basis of their subjective convictions and upon their subjective notions of what the other believed . As each agent gauges the probable behavior of others , uncertainty begets uncertainty . A rich psychology emerges of divergent and contradictory forecasting convictions among traders , and this moves the market to exhibit complex and rapidly episodic alternative states . Rapid propagation of change through the interconnected behaviors of heterogeneous agents is the core issue being pursued in complexity economics to understand the volatility of financial markets . Keynes is a precursor of this approach .

Hayek was more confident than Keynes that society would converge to its most desirable shape if left to its own . He anticipated that self-organization , or “ spontaneous order ,” that arose from the behavior of rational self-interested individuals would lead to a satisfactorily coordinated state . Thus , Hayek is identified with the belief that a society will self-organize into a desired state without the government imposing it . Ironically , both scholars emphasized that a self-adjusting economy requires a

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