Complexity and Economics
Victor A. Beker
Victor A. Beker is Professor of Economics at the University of Belgrano and the University of Buenos Aires, Argentina.
Please cite the paper as:
Victor A. Beker, (2017), Complexity and Economics, World Economics Association (WEA) Conferences, No. 2 2017, Economic Philosophy: Complexities in Economics, 2nd October to 7th December 2017
Nobody will discuss that the economy constitutes a very complex system. The traditional approach to understanding it has been to reduce complexities to simple rules and behaviors, abstracting of many features of the real economy.
An alternative to reductionism consists of studying economic systems with a complexity approach. The complexity approach ́s point of departure is that the behavior of the whole is much more complex than the behavior of the parts.
Complexity economics has focused on economic phenomena like business cycle, crises and other out of equilibrium behavior. Its use of non-linear models offers the advantage that the same model allows us to describe stable as well as unstable and even chaotic behaviors.
The use of non-linear models in finance as well as the possibility of finding chaotic behavior in economics are discussed. Models of interacting agents in economics and finance are mentioned as another promising line of research in complexity applied to economics. Finally, whether the complexity approach is another twist of orthodoxy or constitutes a heterodox paradigm is another issue discussed in the paper.