New Books in Science J. Doyne Farmer, "Making Sense of Chaos" (Yale UP, 2024)
Sep 25, 2025
J. Doyne Farmer, a leading complexity scientist and director at the Institute for New Economic Thinking, shares insights from his book, *Making Sense of Chaos*. He discusses how conventional economic models fail to capture real-world complexities and advocates for a bottom-up approach using agent-based models. Farmer explains concepts like bounded rationality, endogenous shocks, and emergent phenomena in economics. He also highlights the role of big data and AI in improving economic predictions and addresses how complexity economics can inform climate transition strategies.
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Bottom-Up Simulation Beats As-If Optimization
- Complexity economics models economies bottom-up with boundedly rational agents in simulations rather than top-down optimization.
- This lets models capture ongoing feedback where agent actions create new information that changes future decisions.
Model Humans As Boundedly Rational
- Bounded rationality accepts humans have limited computational capacity and use heuristics to decide.
- Modeling boundedly rational agents makes large-scale, realistic simulations tractable and informative.
Chaos Generates Endogenous Unpredictability
- Chaos means nearby states diverge exponentially, so measurement uncertainty rapidly destroys long-term predictability.
- Chaos also produces endogenous motion: systems generate change from within without external shocks.
