Complexity and the Economy

by W. Brian Arthur

Overview

Economics is changing. In the last few years it has generated a number of new approaches. One of the most promising - complexity economics - was pioneered in the 1980s and 1990s by a small team at the Santa Fe Institute. Economist and complexity theorist W. Brian Arthur led that team, and in this book he collects many of his articles on this new approach. The traditional framework sees behavior in the economy as in an equilibrium steady state. People in the economy face well-defined problems and use perfect deductive reasoning to base their actions on. The complexity framework, by contrast, sees the economy as always in process, always changing. People try to make sense of the situations they face using whatever reasoning they have at hand, and together create outcomes they must individually react to anew. The resulting economy is not a well-ordered machine, but a complex evolving system that is imperfect, perpetually constructing itself anew, and brimming with vitality.

The new vision complements and widens the standard one, and it helps answer many questions: Why does the stock market show moods and a psychology? Why do high-tech markets tend to lock in to the dominance of one or two very large players? How do economies form, and how do they continually alter in structure over time?

The papers collected here were among the first to use evolutionary computation, agent-based modeling, and cognitive psychology. They cover topics as disparate as how markets form out of beliefs; how technology evolves over the long span of time; why systems and bureaucracies get more complicated as they evolve; and how financial crises can be foreseen and prevented in the future.

Product Details

ISBN-13:	9780199334292
Publisher:	Oxford University Press
Publication date:	10/30/2014
Edition description:	New Edition
Pages:	240
Sales rank:	702,810
Product dimensions:	6.20(w) x 9.30(h) x 1.20(d)

About the Author

W. Brian Arthur is a leading economist and complexity theorist. He is the recipient of the Schumpeter Prize in Economics and the Lagrange Prize in Complexity Science.

Table of Contents

1. Complexity Economics: A Different Framework for Economic Thought

2. Inductive Reasoning and Bounded Rationality: The El Farol Problem

3. Asset Pricing Under Endogenous Expectations in an Artificial Stock Market
W. Brian Arthur, John H. Holland, Blake LeBaron, Richard Palmer,
and Paul Tayler

4. Competing Technologies, Increasing Returns, and Lock-In by Historical Events

5. Process and Emergence in the Economy
W. Brian Arthur, Steven Durlauf, and David A. Lane

6. All Systems will be Gamed: Exploitive Behavior in Economic and Social Systems

7. The Evolution of Technology in a Simple Computer Model
W. Brian Arthur and Wolfgang Polak

8. The Economy Evolving as its Technologies Evolve

9. On the Evolution of Complexity

10. Cognition: The Black Box of Economics

11. The End of Certainty in Economics

12. Complexity and the Economy

Editorial Reviews

"In 1999, Arthur's significant paper in Science introduced the notion of complexity and the economy. . In the decade and a half since he first promoted the concept, Arthur has been exploring the evolutionary complexity of the economy by using innovative and unusual theoretical technologies, finessing his earlier visions, and suggesting new ways of conceptualizing the foundations of economic theory. The essays in this volume are all a result of this felicitous exploration. [T]he book is a rich source of ideas, all structured within thoroughly innovative frameworks and presented with the clarity of a masterful prose writer. Highly recommended." —K. V. Veupillai, CHOICE Magazine

"Arthur's book shows that there are many new methods and techniques can be used to change the way we think about the economy and propose policies and laws." — Andrew Sheng

From the Publisher