Complex systems is the study of emergent phenomena. These occur when the behavior of a system as a whole is qualitatively different from that of its individual parts. A good example is the brain: An individual neuron is a relatively simple device that takes in stimuli from other neurons and produces new stimuli. An individual neuron is not

The making of a laptop illustrates how the economy operates like a big metabolism. The production network has a structure similar to the proto-life model described earlier. Their definitions are the same except for a change in noun phrases: A metabolism is a network of chemical reactions that transforms a food set of chemical inputs into other

Their core strategy was a type of statistical arbitrage called convergence trading, which involves making bets on the spreads between interest rates on bonds, for example, by buying British bonds and selling American bonds. Their strategy was predicated on two assumptions: First, when differences in interest rates widen, they will eventually

Standard models in economics assume that supply equals demand. This is a reasonable approximation for the stock market on timescales of more than a day, but it is a terrible approximation for housing markets.

There are several ways in which physicists approach science differently than economists do. Physicists are taught to stay as close to the data as possible; theories should emerge from empirical observations. Economists, on the other hand, are taught to build theories and then test whether they match the data. Their justification is that, unlike in

Complexity-economics models, in contrast, do not necessarily assume equilibrium, but regard it as an emergent property when it happens.

Psychologists call this heuristic aspiration-level adaptation.

By definition, a system is nonlinear if the whole is different from the sum of its parts. In contrast, a system is linear if the whole is equal to the sum of its parts.

Complex systems like the brain or an ant colony are called adaptive complex systems. They are distinguished from ordinary complex systems with simpler emergent behaviors by the fact that their properties have evolved over time, through a process of selection.