The Dissenter

#1029 J. Doyne Farmer - Making Sense of Chaos: A Better Economics for a Better World

Dec 6, 2024

J. Doyne Farmer, a leading figure in complexity economics and professor at the University of Oxford, dives into the chaotic nature of economic systems. He discusses how traditional models often fail to account for unpredictability and the importance of agent-based simulations. The conversation also uncovers strategies for transitioning to net-zero emissions, emphasizing the rapid advancements in renewable energy. Farmer critiques the connection between economic policies and inequality while advocating for a more nuanced approach to policy evaluation.

46:48

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Episode guests

J. Doyne Farmer

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Quick takeaways

The economy functions as a complex system, where emergent properties arise from collective actions exceeding individual capabilities, necessitating new economic theories.

Chaos theory elucidates unpredictable economic fluctuations, underscoring the need for agent-based models to simulate interactions and inform effective policy interventions on inequality.

Deep dives

Understanding Complexity in Economics

Economics operates as a complex system characterized by emergent properties, where societal interactions create outcomes greater than individual capabilities. This complexity emerges as individuals and organizations collaborate, enabling economic outputs that would be unimaginable if each acted alone. For instance, an economy's functions transcend the mere sum of individual transactions, suggesting that collective efforts lead to an emergent phenomenon with transformative potential. Understanding this complexity is crucial for developing more effective economic theories and solutions that account for unpredictable interactions.

Intro

2min

Understanding Chaos in Complexity Theory

3min

Economic Systems and Simulations

25min

Transitioning to Net-Zero: The Economics of Climate Action

7min

Economic Solutions for Climate Change

4min

Understanding Inequality in Economic Policy Evaluation

2min

Connecting Economic Ideas to Practical Solutions

4min

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Dr. J. Doyne Farmer is the Director of the Complexity Economics programme at the Institute for New Economic Thinking at the Oxford Martin School, Baillie Gifford Professor in the Mathematical Institute at the University of Oxford and an External Professor at the Santa Fe Institute. His current research is in economics, including agent-based modeling, financial instability and technological progress. His past research includes complex systems, dynamical systems theory, time series analysis and theoretical biology. He was an Oppenheimer Fellow and the founder of the Complex Systems Group at Los Alamos National Laboratory. He is the author of Making Sense of Chaos: A Better Economics for a Better World.

In this episode, we focus on Making Sense of Chaos. We talk about the economy as a complex system, business cycles, simulating the economy, and the housing bubble crises of the 2000s. We discuss the differences between standard economics and complexity economics. We talk about how we can understand inequality, market inefficiencies and crashes, and whether we can prevent financial crises. Finally, we discuss climate economics, how we can solve climate change, and whether we can tackle inequality.

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