The New Economy and Macroeconomic Stability: A Neo-Modern Perspective Drawing on the Complexity Approach and Keynesian Economics
Teodoro Dario Togati, Routledge, 2006, 309 pages, £80.00.

The main premise of this book is to account for the pervasiveness of the New Economy and its implications for macroeconomic stability. The approach argues that conclusions concerning stability or instability should be drawn from both endogenous and exogenous mechanisms as well as emphasising the significance of interactions between economic phenomena, historical factors and institutions. To this end, it argues that a neo-modern methodology utilising complexity theory and Keynesian theory is necessary if we are to build a better understanding of the New Economy and its effects on macroeconomic stability. Such a perspective, it is argued, is more capable of dealing with the economic policy complexities of the combined dynamic features of the New Economy.

The book develops this analysis in five parts. Firstly, it explores the concept of stability from both a theoretical and analytical standpoint and develops the argument that existing approaches, both orthodox and heterodox, while providing some useful insights, are inadequate for the required task.

The second part develops an alternative ‘neo-modern’ methodological perspective that, it is argued, is fit for purpose. This alternative draws on the Santa Fe Institute’s approach to complexity and relies on light theory that integrates with historical and institutional factors and emphasises the importance of empirical data.

The third part examines the Neo-Classical and Keynesian theories of the New Economy and proposes that the Keynesian theory is better suited for defining, in a broad sense, the New Economy and, consequently, for use in policy formulation.

The fourth part of the book utilises this neo-modern methodology to give a preliminary measurement of the New Economy and its stability in terms of the ‘Calvino’ categorisations of multiplicity, rapidity, lightness, pre-cision and visibility. This approach draws the conclusions that the New Economy is characterised by five major trends affecting stability, accelerating globalisation, technological change, size of services and finance in total output, precision of data collection/measurement tech-niques, and policy stance.

The final part of the book examines the implications of these five major trends for the New Economy by comparing and contrasting the alternative scenarios proposed by the New Classical and Keynesian models. It concludes, as in section three, that the Keynesian approach in relation to stability is probably more generalisable from a policy perspective than the more restrictive New Classical alternative.

Readers of this book will find the arguments one-sided but it does do exactly what it says in the title.

Russell Smith
University of Wales Institute, Cardiff