Complexity Economics: Proceedings of the Santa Fe Institute's 2019 Fall Symposium

“In equilibrium systems, everything adds up nicely and linearly. It is trivial to generalize to many agents; this simply corresponds to connecting more glasses of water. The effect on the water level from adding several drops of water is proportional to the number of drops. One does not have to think about the individual drops. In physics, we refer

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“In equilibrium systems, everything adds up nicely and linearly. It is trivial to generalize to many agents; this simply corresponds to connecting more glasses of water. The effect on the water level from adding several drops of water is proportional to the number of drops. One does not have to think about the individual drops. In physics, we refer

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Instead of assuming agents were perfectly rational, we allowed there were limits to how smart they were. Instead of assuming the economy displayed diminishing returns (negative feedbacks), we allowed that it might also contain increasing returns (positive feedbacks). Instead of assuming the economy was a mechanistic system operating at equilibrium,

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To see how complexity economics works, think of the agents in the economy—consumers, firms, banks, investors—as buying and selling, producing, strategizing, and forecasting. From all this behavior markets form, prices form, trading patterns form: aggregate patterns form. Complexity economics asks how individual behaviors in a situation might react

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Indeed, except for the very simplest physical systems, virtually everything and everybody in the world is caught up in a vast, nonlinear web of incentives and constraints and connections. The slightest change in one place causes tremors everywhere else. We can't help but disturb the universe, as T.S. Eliot almost said. The whole is almost always eq... See more