Your Royal Society rightly commemorates the successes of the natural sciences. Many of these successes have been achieved because the problems of physics often involve objects large enough to be studied individually – the motion of the earth, for example. Or components small enough to be subject to statistical regularities – we can never predict the behaviour of an individual molecule or electron, but there are so many molecules and electrons that for most purposes it does not matter. Many of the phenomena we deal with in economics and business fall in between – the units of analysis are individualistic but also too numerous for their idiosyncrasies to be individually understood.
Economic systems are also dynamic. Dynamic in the sense that they evolve – which makes the mathematics harder. But also dynamic in the sense that the structural relationships constantly change. Some economists – perhaps a majority in your former American colonies – believe there is a deep underlying structure from which laws of economic behaviour that are universal in time and space can be deduced. I think that search is a wild goose chase and that the best we can do is to identify empirical regularities that
apply to particular contexts. Whoever is right, it is evident more work needs to be done in understanding the relationships.
But the killer is that dynamic complexity interacts with non-linearity. If that statement sounds like an extract from a monologue by Gordon Brown, UK prime minister, recall the (false) story that your predecessor, Richard III, lost the crown at Bosworth Field for want of a nail in the shoe of his horse. The point is that small differences in initial conditions can have dramatic differences in ultimate outcomes. The problem is often expressed through the metaphor of the butterfly which, by flapping its wings on one side of the world, sets in train a chain of consequences that results in a tornado many thousands of miles away.