Riskgaming The Orthogonal Bet: Complex economics is applying complex systems methods
Oct 9, 2024
J. Doyne Farmer, a physicist and complexity scientist, dives into the intriguing world of complexity economics. He discusses how traditional and complexity economics differ, emphasizing emergent behaviors and simulation methods. Remarkably, Doyne shares a story about building a wearable computer in the 70s to predict roulette outcomes, bridging the gap between gambling and finance. The conversation also touches on predicting economic shocks, generational shifts in economic thought, and the vital role of interdisciplinary collaboration in understanding complex systems.
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Dynamic Equilibrium in Complexity Economics
- Complexity economics models economies as systems where agents interact and adapt over time.
- Equilibrium emerges from dynamics rather than being assumed upfront as in traditional economics.
Heterogeneity and Scale Advances
- Complexity economics handles millions of heterogeneous agents realistically.
- Traditional models are limited by solvable variables, restricting agent diversity and interaction.
Pragmatic Modeling for Policy Analysis
- Perfect economic simulations are unattainable but useful approximations exist.
- Made quantitative agent-based models allow policy impact predictions and iterative refinement.