Complexity economics is neither an add-on to standard economics (see Fontana, 2010), nor does it consist of adding agent-based behavior to standard models. It is a different way of thinking about the economy. It sees the economy not as a system in equilibrium but as one in motion, perpetually “computing” itself—perpetually constructing itself anew. Where equilibrium economics emphasizes order, determinacy, deduction, and stasis, this new framework emphasizes contingency, indeterminacy, sense-making, and openness to change. There is another way to say this. Until now, economics has been a noun-based rather than verb-based science. It has pictured changes over time in the economy function as changes in levels of fixed noun-entities—employment, production, consumption, prices. Now it is shifting toward seeing these changes as a series of verb-actions—forecast, respond, innovate, replace—that cause further actions.
Complexity economics is still in its early days and many economists are pushing its boundaries outward. It shows us an economy perpetually inventing itself, perpetually creating possibilities for exploitation, perpetually open to response. An economy that is not dead, static, timeless, and perfect, but one that is alive, ever-changing, organic, and full of messy vitality.HT: Matthew Baker