New Books Network J. Doyne Farmer, "Making Sense of Chaos" (Yale UP, 2024)
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Sep 25, 2025 
J. Doyne Farmer, Director of the Complexity Economics Program at the Institute for New Economic Thinking and a professor at Oxford, discusses his latest book, 'Making Sense of Chaos.' He explores how complex systems science can reshape our economic models amidst increasing global complexity. Farmer delves into chaos theory, emergence, and the significance of agent-based simulations in predicting economic behavior. He also highlights challenges in mainstream economics and the potential of interdisciplinary approaches for addressing pressing issues like climate change and market volatility.
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Bottom-Up Agent-Based Modeling
- Complexity economics models the economy from the bottom up with boundedly rational agents using simulations.
- Agents interact, generate information, and adapt over time producing emergent macro behavior distinct from equilibrium models.
Bounded Rationality Matters
- Bounded rationality recognizes humans have limited computational capacity and use heuristics to decide.
- This makes detailed, large-scale agent simulations tractable and more realistic than rational-expectations models.
Chaos Creates Endogenous Unpredictability
- Chaos means nearby states diverge exponentially, making precise long-run prediction impossible for some systems.
- Chaotic endogenous motion explains how complex fluctuations can arise internally in systems like weather and economies.
