Complexity Economics

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= "Complexity economics asks how individual behaviors in a situation might react to the pattern they together create, and how that pattern would alter itself as a result, causing the agents to react anew". [1]

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Complexity Economics, Common Wealth, and Climate Change

Peter Barnes:

"Let me end this brisk tour of economics by mentioning a new school of economic thinking based on systems theory. This school is sometimes called ‘complexity economics,’ and one of its leaders is Eric Beinhocker, director of the Institute for New Economic Thinking at Oxford. The basic idea of complexity economics is that an economy, like nature, is a complex adaptive system whose large-scale patterns emerge from the interaction of autonomous agents following simple, internally-coded rules. Another of its tenets is that if a complex system is to remain near equilibrium, its positive and negative feedbacks must be roughly in balance.

The way the market ought to see common wealth is as wealth held in trust for future generations, for other species (when appropriate), and for all living persons.

Positive feedback is amplifying—i.e., it reacts to an action by doing more of it. The classic example is the screech you get from a sound system when the microphone is too close to the loud speaker. Negative feedback is corrective; the classic example is the thermostat. The danger in any complex system is that amplifying feedback will outweigh corrective feedback. When that happens, the system will flip into runaway mode and eventually crash.

The trouble with our current economic system is that its agent population and its feedback mechanisms are both out of balance. In terms of feedback, amplifying feedback far outweighs the corrective kind—thus, the exponential growth of human economic activity and the accelerating rise in inequality. In terms of agents, we essentially have a monoculture of profit-maximizing corporations. These corporations are coded to externalize as many costs as possible—to take as much from workers, nature, and society as they can, and pay as little as they can get away with. Hence, climate change, wealth concentration, and the decline of our middle class.

It’s time now to pull all of these pieces together. My thinking about how to fix the two giant flaws of capitalism is essentially a mélange of Paine, Coase, and complexity economics. What holds the mélange together and makes it work is common wealth." (

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See also the book:

  • Butterfly Economics: A New General Theory of Social and Economic Behavior is a book by Paul Ormerod

"dealing with economic theory, published in 1999. The author uses a plethora of insect-related metaphors to show that an economy tends to function like a living organism and is thus able to learn and to adapt.

The theory presented by the book departs from conventional economic wisdom which understands individuals as isolated decision makers who act based on a rational evaluation of sufficient information about cost and benefits of respective choices. Butterfly economics adds interaction to the equation and argues that individuals interact when pursuing their interests, thereby gaining new information, which in turn influences their decision-making." (