December 14, 1999
Why did VHS, an inferior video recorder technology, succeed in the marketplace, driving the superior Betamax out of business? Why do big-budget, acclaimed moviese sometimes flop at the box office, while low-budget, idiosyncratic films become huge hits? The answers to these questions, says Paul Ormerod, remind us that economics is a science based on the workings of human society, as unpredictable an entity as there is. “Conventional economics is mistaken,” claims Ormerod, “when it views the economy and society as a machine, whose behavior, no matter how complicated, is ultimately predictable and controllable.”
In this cogently and elegantly argued analysis of why human beings persist in engaging in behavior that defies time-honored economic theory, Ormerod also explains why governments and industries throughout the world must completely reconfigure their traditional methods of economic forecasting if they are to succeed and prosper in an increasingly complicated global marketplace.
Paul Ormerod has been head of the Economic Assessment Unit at The Economist and a visiting professor at the Universities of London and Manchester. He lives in London.