Introduction

The first decade of the twenty-first century witnessed the strong impression that the global
economy had become a sphere of extreme uncertainty and risk. Considering the dimension of the crisis,
which started in 2007, this was not very surprising. The crisis didn't look like another business cycle
setback, a temporary overheating or a sectoral bubble such as the previous ‘dot-coms crash’ of 2000. This
was a profound breakdown, strong enough to question the foundations of modern approaches to the
creation of welfare.
This topic asserts that the main reason for the current problems has been the inability of modern
societies to produce enough stability and sustainability. These two elements have been produced so far in
a rather fragmented way and not always efficiently. In fact, we can now observe a fascinating and
globally conducted discussion on how to make the future economic system free from previous
deficiencies. The first part of the chapter is devoted to previous developments and approaches to stability
and sustainability until the last crisis started. The second part focuses on analysis of areas, which are
crucial for reforms and the emergence of a new, less risky and more responsible art of capitalism.

Towards a Sustainable (and more Stable)

There are three areas of economic models that should be re-thought and redesigned.
 Firstly, the issue of what is an ‘efficient market’ needs some new clarification.
 Secondly, we must accept the fact that there might be many different institutional ways to
efficient economic systems, but it does not necessarily mean that some of them are a priori more
efficient, stable and better for sustainability, then the others.
 Thirdly, a redesign needs a wider look at what is economic growth and what kind of growth is
compatible with the idea of sustainability.

Complexity Approach to Markets

Markets are the most substantial, constructional element of economies. However, nowadays we
are dealing with biases which make understanding their functioning puzzling. As a consequence there are
difficulties with efficient economic policy and, obviously with providing stability and sustainability.

 One of them is surely the formal concept of markets which dominates modern economics. It is
based on strong assumptions which make building theoretical models easier. (Fulbrook, 2004;
Keen, 2011).
Example:
a.) Individual actors in such models are generally driven by a one dimensional motivation of
profit, are able to calculate precisely costs and gains, take advantage of access to all necessary
information and are actually not disturbed by other actors who have more power over the
market.
b.) Another strong assumption is that markets tend always to a state of equilibrium set out by
forces of demand and supply. If there is a situation of imbalance caused by external shocks,
these forces push markets ‘automatically’ towards an efficient equilibrium level of price, no
matter what kind of shock caused them.
  This mechanistic paradigm has dominated economics since the nineteenth century, both in
academia and economic policy. It created a strong body of many valuable and sophisticated
theories.
 If one looks for a central term embracing all the problems mentioned above, it is complexity, or,
to be more precise, quickly rising levels of complexity in modern economies. More commodities,
more diversified preferences and needs of actors, more suppliers and more buyers, faster
communication between them, more sophisticated, global relations between markets, etc.
 What should be done? There is a huge need for a more holistic and organic approach to
economies. This social system should be considered as a dynamic, non-linear, self-organizing one
with intelligent, flexible actors, rather than a set of structurally similar markets, which all tend
towards equilibrium (Beinhocker, 2007).

 Economic policy and regulation must also draw consequences from the newest developments –
and this is actually happening. Public agencies try to collect more specific data about markets in
order to deal with complexity challenge. (Arnuk and Saluzzi, 2012).

 There is a very serious problem with imposing such new rules on more and more globally
oriented markets. Fragmented regulation of national markets is insufficient since externalities
have global dimension and produce unequal distribution of costs among countries. (Dessler and
Parson, 2010)

Approaches to Growth
 The Roll-Over Effect
Modern capitalism developed in the last 200 years based itself on the assumption of
growth and expansion. The more products we are able to deliver, the better for everybody.
Expression of this attitude is the domination of the GDP index in measurements of
performance of national economies. It shows the output in a given year and expresses it in
monetary value (national currency). It has many advantages.
1. First of all the GDP offers statistical precision and comparative perspective, since
it is relatively easy to apply similar techniques of collecting and converting data
in countries across the world.
2. On a more general level doubts about quality of growth versus sheer size of GDP
can be analyzed in the context of stability and sustainability of economic
systems. A high number of goods delivered in a national economy translate to
short term growth, which combined with other short term indicators like inflation
or unemployment rates can say a lot about stability.

 More Growth
There is a strong voice in favor of continuation of the existing, dominating path.
Economies should still take care about their output level, so the GDP remains the most
important point of reference. This principle refers not only to natural resources. If for
example capital is more expensive, a more responsible approach to debt would be an
expected reaction leading to financial sustainability.
 Amended Growth
The second approach to growth is a more skeptical one. It sees the GDP index as an
important measure of human achievements, but it has to be combined with additional indexes
which refer to several aspects of quality of life and sustainability.