Thinkers & Ideas
Making Sense of Chaos with Doyne Farmer
Apr 16, 2024
Complex systems scientist Doyne Farmer challenges traditional economics models, advocating for complex systems thinking and agent-based modeling for better predictions. Topics include limitations of standard models, consequences of inadequate models, leveraging alternative modeling techniques in business, and how CEOs can embrace complexity thinking.
30:11
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Quick takeaways
- Traditional economic models have limitations in capturing complex behaviors and interactions in dynamic systems.
- Complex systems thinking and agent-based modeling provide more accurate predictions and understanding of economies by considering interactions and cognitive rules.
Deep dives
Challenging Traditional Economic Models
The podcast episode discusses the limitations of conventional economic models based on three pillars: utility, beliefs, and equilibrium. Traditional economics assumes that individuals selfishly maximize utility, leading to equilibrium. However, this simplistic view, while useful in simple scenarios like tic-tac-toe, falls short in more complex situations. The guest argues that traditional economic models often do not effectively capture phenomena like sensitivity to initial conditions, chaotic behavior, and endogenous behaviors, leading to inaccurate predictions and a lack of understanding.
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