Complexity Economics

Possible repercussions of economic crisis on the stability of democracies that already show significant signs of fragility

The Keynesian Economics and Complexity Economics Working Groups announce two special sessions, to be held at the annual conference of the EEA in New York.

The YSI Complexity Economics Working Group is delighted to invite all Young Scholars interested in Agent Based Modeling to apply for the Summer School on Computational Methods and Agent Based Modeling (Curitiba Summer School)

The FSR Energy Innovation Area and the Complexity Economics Working Group of the Young Scholars Initiative (YSI) have the pleasure to invite you to participate in the 1st Energy Innovation Academy.

The workshop aims to bring together experienced researchers with young scholars in the fields of Innovation, Economic Complexity and Economic Geography to understand knowledge accumulation and spillovers through products, people and places. Those interested in interdisciplinary research, especially bridging a gap between these topics are strongly encouraged to apply. 

The World Economic Roundtable seeks to help the business, investment, and policy communities understand ongoing changes in the world economy and to promote a discussion of ideas that can advance the goal of a widely shared global prosperity.

If standard economic theory can’t explain a traffic jam, how can it cope with crises?

Young Scholars from the YSI working groups on Innovation, Complexity Economics, Philosophy of Economics and Financial Stability will present their research at a one-day workshop following The Economics of Post-Factual Democracy conference in Copenhagen, Denmark.

Notes from the Institute’s Director of Research on some significant papers and contributions produced in 2016 under the INET rubric 

Prof. Sanjeev Goyal explains his general theory of network formation based on individual incentives, and their economic implications

The financial crisis of 2008 was unforeseen to a significant extent. One reason is that the dominant academic theories influencing political decision makers ignore recent advances and instead rely largely on models and decision science dating back to the Second World War.

Senator Elizabeth Warren, Federal Reserve Chairman Janet Yellen, and IMF Managing Director Christine Lagarde joined a renowned group of globally influential women in discussing how the financial system can be re-imagined to truly benefit society.

John Muth proposed the Rational Expectations Hypothesis (REH) to represent how the market (an aggregate of its participants) understands and forecasts outcomes. REH imposes internal consistency between the market’s forecasts and “the relevant economic theory” (Muth 1961, p. 316).

The largely unexpected arrival of the global economic crisis and the largely unpredicted slowness of the recovery from the Great Recession should be precipitating an intellectual crisis across economics and policy making. We require additional theories and additional methods to detect how an economy is evolving and to provide the basis for policy intervention (Haldane, 2014).

The central concepts of Keynes’ macroeconomic theories concerning the behavior of labor markets, aggregate demand, and asset pricing can be formulated as special cases of a general social interaction model.

This chapter surveys experimental research on networks in economics.

Individuals derive benefits from their connections, but these may, at the same time, transmit external threats. Individuals therefore invest in security to protect themselves. However, the incentives to invest in security depend on their network exposures. We study the problem of designing a network that provides the right individual incentives.

The tension between efficiency and equilibrium is a central feature of economic systems. In many contexts, social networks mediate this trade-off: an individual’s network position determines equilibrium play, and social relations allow coordination on an efficient norm.

Anyone who has spent time in a developing country knows the importance of social connections. Among their many roles, these connections help individuals land jobs, and provide them with credit and other forms of support.

“You are now leaving the world as you know it.”

Ronald Coase, who passed away last week at age 102, spent his academic career swimming against the current.

what is economically correct must always be balanced with what is morally right.

Did the global economic collapse in 2008 stem from structural failures in the capitalist system?

“Four men sat at a table. Raised sixty floors above the city, they did not speak loudly as one speaks from a height in the freedom of air and space; they kept their voices low, as befitted a cellar.”

In the wake of the 2008 financial crisis, many of our policy makers and top economists are still stumbling in the dark.

In this paper we provide a summary and a guide to the literature for a new line of research which goes under the name of Economic Complexity and is partly performed incollaboration with INET.

What is the purpose of economics?

What happens when there’s no leader in the global economy?

Can economics be morally centered? And perhaps more importantly, should it be?

I am supposed to speak about Complexity Economics and the issues this theoretical approach is able to illuminate. Defined as such, it appears as if I should discuss methodology and I am reminded of Paul Krugman’s quote: “It is said that those who can, do, while those who cannot, discuss methodology”. So, having a discussion centered on methodology may give the impression that the panelists in this session are unable to make scientific progress.

Complexity economics represents a different vision of the economic process and has the capacity to illuminate different systems of behavior.

The path to better understanding the economy requires treating the economy as the complex system that it really is. We need more realistic behavioral models, but even more important, we need to capture the most important components of the economy and their most important interactions, and make realistic models of institutions.

In 1803 Louis Poinsot, a French physicist, wrote a book of great success, Elements de Statique, which was destined to have practical and social influences unimaginable to the same author.

As Carmen Reinhart and Kenneth Rogoff remind us in the title of their book, This Time is Different: Eight Centuries of Financial Folly, financial crises are nothing new (Reinhart and Rogoff (2009)). However, they often come as a surprise to many people because in most countries they appear only periodically.