This chapter addresses the limitations of traditional economic models in predicting housing market fluctuations and broader economic impacts. It explores the advantages of agent-based modeling over conventional approaches, emphasizing the need for a nuanced understanding of human behavior and market dynamics. The discussion also highlights recent advancements in complexity economics and the emerging shift towards innovative modeling techniques in academic and policy environments.
Physicist J. Doyne Farmer wants a new kind of economics that takes account of what we've learned from chaos theory and that builds more accurate models of how humans actually behave. Listen as he makes the case for complexity economics with EconTalk's Russ Roberts. Farmer argues that complexity economics makes better predictions than standard economic theory and does a better job dealing with the biggest problems in today's society.