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The Microeconomics of
Complex Economies:
Evolutionary, Institutional,
Neoclassical, and Complexity
Perspectives, by Wolfram
Elsner, Torsten Heinrich,
and Henning Schwardt.
Oxford, UK: Academic
Press, 2014. Hardback: ISBN
978-0-12-411585-9, $119.00,
600 pages
a
Sidonia von Proff
a
Philipps-Universität Marburg (Germany)
Published online: 21 Apr 2015.
To cite this article: Sidonia von Proff (2015) The Microeconomics of Complex
Economies: Evolutionary, Institutional, Neoclassical, and Complexity Perspectives, by
Wolfram Elsner, Torsten Heinrich, and Henning Schwardt. Oxford, UK: Academic Press,
2014. Hardback: ISBN 978-0-12-411585-9, $119.00, 600 pages, Journal of Economic
Issues, 49:1, 297-299, DOI: 10.1080/00213624.2015.1013897
To link to this article: http://dx.doi.org/10.1080/00213624.2015.1013897
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JOURNAL OF ECONOMIC ISSUES
Vol. XLIX No. 1 March 2015
DOI 10.1080/00213624.2015.1013897
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Book Review
The Microeconomics of Complex Economies: Evolutionary, Institutional, Neoclassical, and
Complexity Perspectives, by Wolfram Elsner, Torsten Heinrich, and Henning Schwardt.
Oxford, UK: Academic Press, 2014. Hardback: ISBN 978-0-12-411585-9, $119.00,
600 pages
The financial crisis following the bankruptcy of Lehman Brothers led to an intense
discussion of the applicability of mainstream economics. Neoclassical approaches were
harshly criticized because they do not represent the real world. Hence, heterodox
economists felt an upsurge of interest, especially from students of economy who
wanted to learn better applicable models. Wolfram Elsner, Torsten Heinrich, and
Henning Schwardt, from the University of Bremen (Germany), now provide a new
microeconomics textbook containing alternative approaches to complex economies.
They do not start with chapters on demand, supply, and then (partial) equilibria, but
with problems arising from the direct interdependence of economic actors and from
uncertainty. This is rather revolutionary since, up till now, all (micro-) economics
textbooks emphasize the neoclassical approach. However, overall, Elsner, Heinrich,
and Schwardt could be even more radical: In the book, the authors not only refer to
neoclassical theory, but they also repeatedly separate themselves from it. For
undergraduates, who are just starting with economics, this means that they either have
to learn neoclassical theory first, or accept that there are comparisons throughout the
book which are of no importance to them. This is very unfortunate. Why are not the
authors being even more radical by teaching the new approach without referencing
neoclassical theory so extensively?
But let me start at the beginning. In the preface, Elsner, Heinrich, and Schwardt
sum up the reasons for writing this textbook and provide an overview of its structure.
A “didactics” section follows, where one finds out which chapter is suitable for which
type of student and which chapters are prerequisites for other chapters. After that
introduction, the reader should be prepared for using the book.
There are five parts in the book: (i) Basics of the Interdependent Economy and
Its Processes; (ii) Markets: General-Equilibrium Theory and Real-World Market
Structures; (iii) Further Tools and the Analysis of Complex Economies; (iv) History of
Thought and Contemporary Models in Complexity Economics; and (v) Further
297
©2015, Journal of Economic Issues / Association for Evolutionary Economics
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298
Book Review
Applications: Information, Innovation, Policy, and Methodology. Each chapter
contains exercises without solutions, which are appropriate for individual or group
solving. On the book’s website, the authors make recommendations for further
readings and provide abstracts for each chapter. For the first eight chapters, slides are
made available for classroom use. Whether one uses these slides, or creates one’s own
based on them, they are a nice addition to the book.
In the first part, the authors start with explaining types of problems that arise
from social interaction, followed by an introduction to game theory as a method of
solving such problems. These basics are well explained, but too many terms are only
briefly defined or not at all (e.g., the term “sunk costs” may not be familiar to all
students, and the history of the term “chicken game” is not explained). Thus, it will
be difficult for first-year students to understand this dense text, although the book is
fine as a revision material for advanced students. The fourth chapter in this part deals
with everyday economic phenomena and provokes one’s curiosity of getting deeper
into economics, even though the chapter focuses on European rather than world
developments without so specifying).
The second part of the book introduces some models, in particular, the
neoclassical equilibrium model and the criticism on it. Without this knowledge, later
models are difficult to understand since many of them refer, in one way or another, to
equilibrium models. The explanations are short and dense, but easy to understand.
The third part is a methodological one, giving an overview of game theory,
simulation, dynamic systems, and their application. Here, the book becomes
increasingly difficult to understand on its own, and consulting additional textbooks
will be helpful. For those users wanting to go deeper into simulation, the scripts for
the examples are available online and easy to apply.
The fourth part adds an overview of history of economic thought with a focus
on complexity themes covered already by early economists. This chapter will provide
surprising insights for those who have only superficial knowledge of Adam Smith,
Joseph Schumpeter, Thorstein Veblen, and others, because complexity questions
came up earlier than usually told. In addition, the authors present newer models
(from the second half of the twentieth century) on complexity in economics. This is
rather uncommon for a textbook, and thus very interesting and helpful. The authors
use a minimum of mathematics since their focus lies in the overall understanding of
the approaches, and not in the details of the models.
The last part of the book contains some applications of the presented theories
and methods to recent topics, open source, innovation, networks, as well as policy
implications following from the considerations of these topics. These chapters will be
very useful in showing students the applicability of economic theory to real-world
experiences. Thus, the book has a good balance of theoretical analysis and discussions
of economic phenomena of everyday life that should provoke students’ interest in
economics. The last chapter goes one step beyond earlier chapters and reasons about
economic theorizing in general.
The textbook is intended for undergraduate and graduate students, as well as for
first-year students and students in advanced micro-courses. This is a very broad target
Book Review
299
audience, but I believe that the book will be of better use for intermediated/advanced
students compared to beginners. For the latter group, the text is too dense and
contains too many non-explained terms. The density of the text often makes it read
like a handbook rather than a textbook, but, overall, the authors have contributed
greatly to bringing heterodox teaching into microeconomics.
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Sidonia von Proff
Philipps-Universität Marburg (Germany)
Sidonia von Proff is a lecturer and researcher in economic geography at Philipps-Universität Marburg (Germany).