Complex systems; Complexity economics

Complex systems; Complexity economics

[This is closely related to the ‘whole systems’ section above]. The following challenges for complexity economics are summarised from the website Exploring-economics.

(1) Is this a new field or a tool for understanding and explanation, like mathematics?

(2) What is the role of mathematics?

(3) How complex should the models be in order to provide understanding? Humans are far more complex than can be modelled; hence radical simplification is inevitable, e.g. agent-based modelling where the agents adopt simple rules.

(4) How should agent-based models be replicated and validated? Should they explain stylised facts? Clearly there is a trade-off between simplicity of explanation and the matching with economic observations.

References:

Beinhocker, Eric D. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, Massachusetts: Harvard Business School Press, 2006.

Foxon, Timothy, Jonathan Köhler, Jonathan Michie, Christine Oughton, Towards a new complexity economics for sustainability, Cambridge Journal of Economics, Volume 37, Issue 1, January 2013, Pages 187–208, https://doi.org/10.1093/cje/bes057

Gräbner, C. (2017). How to relate models to reality? An epistemological framework for the validation and verification of computational models (No. 63). ICAE Working Paper Series.

Kirman, Alan (2016). “Complexity and Economic Policy: A Paradigm Shift or a Change in Perspective? A Review Essay on David Colander and Roland Kupers’s Complexity and the Art of Public Policy,” Journal of Economic Literature, American Economic Association, vol. 54(2), pages 534-572, June. Academic link

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