COMPLEXITY

W. Brian Arthur (Part 1) on The History of Complexity Economics

Jan 8, 2020

57:03

Snipd AI

W. Brian Arthur, an economics pioneer and complexity theory expert, discusses the shift from traditional economics to complexity economics, where markets are seen as systems out of balance. They talk about how complex systems evolve, the impact of technology on the economy, and the need to understand non-equilibrium conditions for dynamic strategies and innovations.

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Quick takeaways

Complexity economics views markets as dynamic ecosystems in constant imbalance, departing from traditional equilibrium model.

Insights from complexity economics illuminate economic growth, market crashes, competitive advantages, and technological evolution.

Deep dives

The Emergence of Complexity Economics

The podcast delves into the shift from traditional economics that views the economy as a perfect machine in equilibrium to complexity economics that sees it as a dynamic ecology. The new paradigm borrows from ecology and evolutionary biology to understand markets and technologies as systems in constant imbalance. Insights from complexity economics shed light on economic growth, market crashes, competitive advantages, and technological evolution.

Introduction

4min

Exploring the Origins of Complexity Economics at the Santa Fe Institute

4min

Exploring the Origins of Complexity Economics Framework

2min

Escaping Equilibrium: Embracing Complexity in Economics

12min

Evolving Strategies in Complex Systems

27min

Exploring the Evolution of Technology and Its Impact on the Economy

5min

Exploring the Evolution of Technologies and Human Purpose in Innovation

3min

From its beginnings as a discipline nearly 150 years ago, economics rested on assumptions that don’t hold up when studied in the present day. The notion that our economic systems are in equilibrium, that they’re made of actors making simple rational and self-interested decisions with perfect knowledge of society— these ideas prove about as useful in the Information Age as Newton’s laws of motion are to quantum physicists. A novel paradigm for economics, borrowing insights from ecology and evolutionary biology, started to emerge at SFI in the late 1980s — one that treats our markets and technologies as systems out of balance, serving metabolic forces, made of agents with imperfect information and acting on fundamental uncertainty. This new complexity economics uses new tools and data sets to shed light on puzzles standard economics couldn’t answer — like why the economy grows, how sudden and cascading crashes happen, why some companies and cities lock in permanent competitive advantages, and how technology evolves. And complexity economics offers insights back to biology, providing a new lens through which to understand the vastly intricate exchanges on which human life depends.

This week’s guest is W. Brian Arthur, External Professor at the Santa Fe Institute, Fellow at the Center for Advanced Study in the Behavioral Sciences at Stanford, and Visiting Researcher at Xerox PARC. In this first part of a two-episode conversation, we discuss the heady early days when complex systems science took on economics, and how biology provided a new paradigm for understanding our financial and technological systems. Tune in next week for part two...

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Podcast Theme Music by Mitch Mignano.

For more information:

Brian’s Website.

Brian’s Google Scholar page.

“Where is technology taking the economy?” in McKinsey, 2017.

The Nature of Technology: What It Is and How It Evolves.

“Punctuated equilibria: the tempo and mode of evolution reconsidered” by Gould & Eldredge.