Complexity economics: Difference between revisions
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# '''Novelty niches''' — These are associated with new markets, new technologies, new behaviors, and new institutions. The very act of filling a niche may provide new niches. The result is ongoing novelty. |
# '''Novelty niches''' — These are associated with new markets, new technologies, new behaviors, and new institutions. The very act of filling a niche may provide new niches. The result is ongoing novelty. |
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# '''Out-of-equilibrium dynamics''' — Because new niches, new potentials, new possibilities, are continually created, the economy functions without attaining any optimum or global equilibrium. Improvements occur regularly. |
# '''Out-of-equilibrium dynamics''' — Because new niches, new potentials, new possibilities, are continually created, the economy functions without attaining any optimum or global equilibrium. Improvements occur regularly. |
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==The Place Of Complexity Economics Among Contemporary Trends In Economics== |
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A number of scholars have surveyed recent trends among economists. John B. Davis<ref name="Davis2006">Davis, John B. "The Turn in Economics: Neoclassical Dominance to Mainstream Pluralism?" <I>Journal of Institutional Economics</I>, V. 2, N. 1 (2006): 1-20</ref><ref name=Davis2007>Davis, John B. "The Turn in Recent Economics and Return of Orthodoxy", <I>Cambridge Journal of Economics</I>, V. 32, N. 3: 349-366</ref>, in his surveys of economics, distinguishes between two divisions: orthodox and heterodox economics are categorized based on the content of their theories, while mainstream and non-mainstream economics are sociological categories constructed by citation networks, conferences, and professional societies, for example. As shown in the following table, Davis classifies a number of schools of thought, trends, and fields by these divisions. Complexity economics is a mainstream heterodox field in economics. |
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{| class="wikitable" |
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! Non-Mainstream Heterodox Economics |
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! Mainstream Heterodox Economics |
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! Principles of Mainstream Orthodox Economics |
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|<UL><LI>Marxism</LI><LI>Radical political economy</LI><LI>Institutionalism</LI><LI>Post Keynesianism</LI><LI>Austrian School</LI><LI>Regulation schools</LI><LI>Circuitists</LI><LI>Feminist economics</LI></UL> |
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|<UL><LI>Game theory (maybe now orthodox)</LI><LI>Behavioral economics</LI><LI>Experimental Economics</LI><LI>Evolutionary Economics</LI><LI>Neuroeconomics</LI><LI>Complexity Economics</LI></UL> |
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|<UL><LI>Formal models</LI><LI>Atomistic, non-socially embedded individuals</LI><LI>Equilibrium models set out of historical time</LI><LI>Methodological individualism, social structures explained by aggregation over individuals</LI></UL> |
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== See also == |
== See also == |
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Revision as of 23:40, 13 April 2011
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Complexity economics is the application of complexity science to the problems of economics. It studies computer simulations to gain insight into economic dynamics, and avoids the assumption that the economy is a system in equilibrium.[1]
Introduction
Complexity economics[2][3][4] draws inspiration from areas such as behavioral economics, Marxian economics, institutional economics/evolutionary economics, Austrian economics and the work of Adam Smith.[5] It also draws inspiration from other fields, such as statistical mechanics in physics, and evolutionary biology. The theory of complex dynamic systems has been applied in diverse fields in economics, from capital theory[6][7] to game theory[8] and has attracted the attention of historians of economics (e.g., [9]).
Criticism
In 1995-1997 publications, John Horgan has "ridiculed" the movement as being the fourth C among the "failed fads" of "complexity, chaos, catastrophe, and cybernetics": In 1997, Horgan wrote that the approach had "created some potent metaphors: the butterfly effect, fractals, artificial life, the edge of chaos, self organized criticality. But they have not told us anything about the world that is both concrete and truly surprising, either in a negative or in a positive sense".[10][11][12] A review in the discussion journal of the American Economic Association, the Journal of Economic Perspectives, "granted" Horgan "that it is hard to identify a concrete and surprising discovery (rather than "mere metaphor") that has arisen due to the emergence of complexity analysis."[10]
Features
Brian Arthur, Steven N. Durlauf, and David A. Lane describe several several features of complex systems that deserve greater attention in economics.[13]
- Dispersed interaction — The economy has interaction between many dispersed, heterogeneous, agents. The action of any given agent depends upon the anticipated actions of other agents and on the aggregate state of the economy.
- No global controller — No global entity controls interactions. Traditionally, a fictitious auctioneer has appeared in some mathematical analyses of general equilibrium models, although nobody claimed any descriptive accuracy for such models. Traditionally, many mainstream models have imposed constraints, such as requiring that budgets be balanced, and such constraints are avoided in complexity economics. Instead, controls are provided by mechanisms of competition and coordination between agents. Economic actions are mediated by legal institutions, assigned roles, and shifting associations.
- Cross-cutting hierarchical organization — The economy has many levels of organization and interaction. Units at any given level behaviors, actions, strategies, products typically serve as "building blocks" for constructing units at the next higher level. The overall organization is more than hierarchical, with many sorts of tangling interactions (associations, channels of communication) across levels.
- Ongoing adaptation — Behaviors, actions, strategies, and products are revised frequently as the individual agents accumulate experience.
- Novelty niches — These are associated with new markets, new technologies, new behaviors, and new institutions. The very act of filling a niche may provide new niches. The result is ongoing novelty.
- Out-of-equilibrium dynamics — Because new niches, new potentials, new possibilities, are continually created, the economy functions without attaining any optimum or global equilibrium. Improvements occur regularly.
The Place Of Complexity Economics Among Contemporary Trends In Economics
A number of scholars have surveyed recent trends among economists. John B. Davis[14][15], in his surveys of economics, distinguishes between two divisions: orthodox and heterodox economics are categorized based on the content of their theories, while mainstream and non-mainstream economics are sociological categories constructed by citation networks, conferences, and professional societies, for example. As shown in the following table, Davis classifies a number of schools of thought, trends, and fields by these divisions. Complexity economics is a mainstream heterodox field in economics.
| Non-Mainstream Heterodox Economics | Mainstream Heterodox Economics | Principles of Mainstream Orthodox Economics |
|---|---|---|
|
|
|
See also
References
- ^ Beinhocker, Eric D. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, Massachusetts: Harvard Business School Press, 2006.
- ^ Goodwin, Richard M. Chaotic Economic Dynamics. Oxford: Clarendon Press (1990)
- ^ Rosser, J. Barkley, Jr. From Catastrophe to Chaos: A General Theory of Economic Discontinuities Boston/Dordrecht: Kluwer Academic.
- ^ Waldrop, M. Mitchell. Complexity: The Emerging Science at the Edge of Order and Chaos. New York:Touchstone (1992)
- ^ Complexity and the History of Economic Thought. Retrieved June 30, 2010: http://sandcat.middlebury.edu/econ/repec/mdl/ancoec/0804.pdf
- ^ Rosser, J. Barkley, Jr. "Reswitching as a Cusp Catastrophe", Journal of Economic Theory, V. 31 (1983): 182-193
- ^ Ahmad, Syed Capital in Economic Theory: Neo-classical, Cambridge, and Chaos. Brookfield: Edward Elgar (1991)
- ^ Sato, Yuzuru, Eizo Akiyama and J. Doyne Farmer. "Chaos in learning a simple two-person game", Proceedings of the National Academy of Sciences o the United States of America, V. 99, N. 7 (2 Apr. 2002): 4748-4751
- ^ Bausor, Randall. "Qualitative dynamics in economics and fluid mechanics: a comparison of recent applications", in Natural Images in Economic Thought: Markets Read in Tooth and Claw. Cambridge: Cambridge University Press (1994).
- ^ a b Rosser, J. Barkley, Jr. "On the Complexities of Complex Economic Dynamics" Journal of Economic Perspectives, V. 13, N. 4 (Fall 1999): 169-192.
- ^ Horgan, John, "From Complexity to Perplexity," Scientific American, June 1995, 272:6, 104 09.
- ^ Horgan, John, The End of Science: Facing the Limits of Knowledge in the Twilight of the Scientific Age. Paperback ed, New York: Broadway Books, 1997.
- ^ Arthur, Brian; Durlauf, Steven; Lane, David A (1997). "Introduction: Process and Emergence in the Economy". The Economy as an Evolving Complex System II. Reading, Mass.: Addison-Wesley.
{{cite book}}:|access-date=requires|url=(help); External link in|chapterurl=|chapterurl=ignored (|chapter-url=suggested) (help) - ^ Davis, John B. "The Turn in Economics: Neoclassical Dominance to Mainstream Pluralism?" Journal of Institutional Economics, V. 2, N. 1 (2006): 1-20
- ^ Davis, John B. "The Turn in Recent Economics and Return of Orthodoxy", Cambridge Journal of Economics, V. 32, N. 3: 349-366
External links
- Santa Fe Institute Birthplace of complexity science
- What Should Policymakers Know About Economic Complexity (PDF) Summary of key ideas in complexity economics