Doyne Farmer on Chaos, Crashes, and Economic Complexity

A large economy is one of the best examples we have of complex dynamics. There are multiple components arranged in complicated overlapping hierarchies, out-of-equilibrium dynamics, nonlinear coupling and feedback between different levels, and ubiquitous unpredictable and chaotic behavior. Nevertheless, many economic models are based on relatively simple equilibrium principles. Doyne Farmer is among a group who think that economists need to start taking the tools of complexity theory seriously, as he argues in his recent book Making Sense of Chaos: A Better Economics for a Better World.