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Complexity economics hits its stride | Santa Fe Institute

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About 30 years ago, economist Kenneth Arrow and physicist Philip Anderson brought together a small group of economists and scientists at the then-new Santa Fe Institute, to discuss the economy as an evolving, complex system. Stanford’s W. Brian Arthur* was one of them. The group, which developed a year later into a research program led by Arthur, suspected something was amiss with conventional, neoclassical economics. The problem wasn't in the math or the models; rather, they worried that the discipline was simplistic in its worldview. For the last 150 years, economic theory has depended on assumptions — made mostly for mathematical convenience — that consumers and investors think hyper-rationally — they respond to well-defined problems using optimal strategies. This approach treats the economy like a well-oiled machine. It's elegant but not realistic, Arthur argues in an essay published recently in Nature Reviews Physics. The economy runs more like an ever-evolving ecology of beliefs,

Complexity economics hits its stride | Santa Fe Institute Brian Arthur (left) and Kenneth Arrow (right) circa 1988, at SFI's former location on Canyon Road in Santa Fe, NM March 8, 2021 About 30 years ago, economist Kenneth Arrow and physicist Philip Anderson brought together a small group of economists and scientists at the then-new Santa Fe Institute, to discuss the economy as an evolving, complex system. Stanford's W. Brian Arthur * was one of them. The group, which developed a year later into a research program led by Arthur, suspected something was amiss with conventional, neoclassical ec

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