From The Conversable Economist:
What distinguishes "complexity economics"? W. Brian Arthur offers a short readable overview in "Foundations of complexity economics" (Nature Reviews Physics 3: 136–145, 2021). This is a personal essay, rather than a literature review. For example, Arthur explains how the modern research agenda for complexity economics emerged from work at the Santa Fe Institute in the late 1980s.
How is complexity economics different from regular economics?Complexity economics sees the economy — or the parts of it that interest us — as not necessarily in equilibrium, its decision makers (or agents) as not superrational, the problems they face as not necessarily well-defined and the economy not as a perfectly humming machine but as an ever-changing ecology of beliefs, organizing principles and behaviours.How does a researcher do economics in this spirit? A common approach is to describe, in mathematical terms, a number of decision-making agents within a certain setting. The agents start off with a range of rules for how they will perceive the situation and how they will make decisions. The rules that any given agent uses can change over time: the agent might learn from experience, or might decide to copy another agent, or the decision-making rule might experience a random change. The researcher can then look at the path of decision-making and outcomes that emerge from this process--a path which will sometimes settle into a relatively stable outcome, but sometimes will not. Arthur writes:Complexity, the overall subject , as I see it is not a science, rather it is a movement within science ... It studies how elements interacting in a system create overall patterns, and how these patterns, in turn, cause the elements to change or adapt in response. The elements might be cells in a cellular automaton, or cars in traffic, or biological cells in an immune system, and they may react to neighbouring cells’ states, or adjacent cars, or concentrations of B and T cells. Whichever the case, complexity asks how individual elements react to the current pattern they mutually create, and what patterns, in turn, result.As Arthur points out, an increasingly digitized world is likely to offer a number of demonstrations of complexity theory at work....
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