Embrace Complexity to Capture Human Behavior

Economics faces a pivotal challenge in accurately modeling human behavior, as traditional rational expectations models fall short due to the complexity of real-world actions. While there are proposals to incorporate this complexity, none have gained significant traction. There is a growing recognition among economists that human behavior is often irrational, yet effective modeling remains elusive. Complexity economics offers a solution, utilizing computer simulations to reflect these intricate behaviors without the constraints of traditional mathematical models. This approach allows for tractable models, enabling the exploration of more realistic economic scenarios.