Complexity Economics: A Different Framework for Economic Thought | W. Brian Arthur

W. Brian Arthur; Complexity Economics: A Different Framework for Economic Thought; Working Paper 2013-04-012; Santa Fe Institute; 2013-04.; 24 pages.


This paper provides a logical framework for complexity economics. Complexity economics builds from the proposition that the economy is not necessarily in equilibrium: economic agents (firms, consumers, investors) constantly change their actions and strategies in response to the outcome they mutually create. This further changes the outcome, which requires them to adjust afresh. Agents thus live in a world where their beliefs and strategies are constantly being “tested” for survival within an outcome or “ecology” these beliefs and strategies together create. Economics has largely avoided this nonequilibrium view in the past, but if we allow it, we see patterns or phenomena not visible to equilibrium analysis. These emerge probabilistically, last for some time and dissipate, and they correspond to complex structures in other fields. We also see the economy not as something given and existing but forming from a constantly developing set of technological innovations, institutions, and arrangements that draw forth further innovations, institutions and arrangements.

Complexity economics sees the economy as in motion, perpetually “computing” itself—perpetually constructing itself anew. Where equilibrium economics emphasizes order, determinacy, deduction, and stasis, complexity economics emphasizes contingency, indeterminacy, sense-making, and openness to change. In this framework time, in the sense of real historical time, becomes important, and a solution is no longer necessarily a set of mathematical conditions but a pattern, a set of emergent phenomena, a set of changes that may induce further changes, a set of existing entities creating novel entities. Equilibrium economics is a special case of nonequilibrium and hence complexity economics, therefore complexity economics is economics done in a more general way. It shows us an economy perpetually inventing itself, creating novel structures and possibilities for exploitation, and perpetually open to response.

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The Economy Isn’t A Machine. It’s Organic and Constantly Evolving | W. Brian Arthur

W. Brian Arthur; The Economy Isn’t A Machine. It’s Organic and Constantly Evolving.; In Evonomics; 2014-10-31
Teaser: The origins of complexity economics

W. Brian Arthur is an External Economics Professor at the Santa Fe Institute and a Visiting Researcher at PARC in California. Formerly at Stanford, he is the recipient of the inaugural Lagrange Prize in Complexity Science and the Schumpeter Prize in Economics.

Complexity and the Economy; Oxford University Press; 2014-10-31; 240 pages; kindle: $20, paper: 31+SHT.

Original Sources

W. Brian Arthur; Economic complexity: A different way to look at the economy; On Their Blog, On Medium; 2014-10-31.
W. Brian Arthur is an External Professor, Santa Fe Institute; Visiting Researcher, Palo Alto Research Center