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In a series of books written over the past decade, Paul Ormerod has criticised orthodox economics for being too mechanistic and divorced from reality and has argued the case for a new approach. As one might expect from a successful business consultant, these books have eye-catching titles—The Death of Economics, Butterfly Economics and now Why Most Things Fail. Their unifying theme is that economics is in thrall to a 19th-century model based on physics when it should really be looking to biology for inspiration. This would make economics focus on what really matters: complexity, ignorance, rivalry, failure and evolution....

...Ormerod made a similar point in his earlier book Butterfly Economics, where he explored the implications of "non-linearity." Most empirical work in the social sciences is based on the assumption that relationships are linear, so that small changes produce small effects and large changes large effects. However, if relationships are non-linear, the link between cause and effect is more complex. Over a certain range small changes may produce small effects, but at a "tipping point" a small change may produce a very large effect. Moreover, this very large effect may be extremely hard to reverse.

This is the vision that underlies the conservative argument on crime. The extent of criminality in a society, it is argued, is partly a matter of material incentives in the form of rewards and punishments, and partly a matter of socialisation. Consider a society in which the crime rate is initially very low and young people rarely meet criminals who lead them into crime. Suppose that punishments are gradually reduced with the result that crime slowly increases. In itself, this may not be a serious problem. However, at a certain point the crime rate may suddenly shoot upwards, perhaps stabilising at a new and very high plateau. Policymakers are likely to respond to this development by reverting to the harsher penalties which they had previously abandoned. Unfortunately, such penalties may have only a limited impact on the crime rate because decades of liberal policy have given rise to a criminal underclass which reproduces itself by transmitting its values to young people.

Conservatives make similar arguments in many other areas, such as divorce law and welfare for lone parents. In each case, they believe that liberal policies set in train social processes that eventually end in disaster and create situations that are very hard to reverse. The liberal response is to dismiss such fears as paranoid and unsupported by the evidence. This is not the place to adjudicate on the issue. The point is that liberals have a rather linear view of social policy in which small changes normally produce small and reversible effects, whereas conservatives have a non-linear view, believing that small changes often give rise to large, unpredictable and irreversible effects. On environmental issues, such as global warming and biodiversity, the positions of these two groups are reversed. Liberals tend to believe that the world is on the brink of disaster and if we do not mend our ways there will be huge and irreversible changes, whereas conservatives take a more relaxed view.

Like Ormerod's previous books, Why Most Things Fail is both intellectually stimulating and entertaining. And despite his initial dismissal of orthodox economics, Ormerod's attitude is actually rather ambivalent. For example, he praises economics for its emphasis on the role of incentives in social life, and he points out that the new economic ideas which inspire his work were all developed by leading and highly regarded members of the economics profession.

Ormerod, despite being a man of the left, is sceptical of human ability to predict and plan. If this is true, what is the role for government? Should it be merely a nightwatchman, defending the polity against internal and external threats, enforcing property rights and preventing crime, or should its role be much wider? Can the state intervene effectively to achieve aims that commend widespread support? Ormerod does not discuss this issue explicitly, although his stress on failure would suggest that most state intervention is pointless. For example, he argues that government attempts to alter the distribution of income have had little long-term impact....