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Sean Carroll's Mindscape: Science, Society, Philosophy, Culture, Arts, and Ideas

293 | Doyne Farmer on Chaos, Crashes, and Economic Complexity

Oct 21, 2024
Doyne Farmer, Director of the Complexity Economics program at Oxford, dives into the chaotic nature of economies and the inadequacies of traditional economic models. He highlights how chaos theory can reshape our understanding of financial systems and promote more accurate predictions. Farmer critiques the reliance on equilibrium, advocating for models that embrace dynamic interactions and real-world complexities. He also draws fascinating parallels between economic systems and ecological dynamics, exploring how innovation intertwines with complexity in markets.
01:11:17

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Quick takeaways

  • Complexity economics shifts the focus from traditional equilibrium models to dynamic systems, illuminating the chaotic nature of real economies.
  • Chaos theory reveals that small shifts in economic systems can lead to significant outcomes, aiding in predicting potential crises and cycles.

Deep dives

The Importance of Complexity Economics

Complexity economics offers a fresh perspective on understanding economic systems by shifting focus from traditional models to more dynamic, complex systems thinking. Conventional economic models often ignore the chaotic nature of real-world economies, typically relying on equilibria and rational decision-making assumptions. In contrast, complexity economics emphasizes that real-world interactions among agents can lead to unpredictable and emergent behaviors, which cannot be captured by simplified approaches. This new perspective is evident in how complex systems science provides frameworks to model economies that account for behaviors that may drastically change over time.

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