capital markets, 176
common knowledge, cannot be
capturing software, 152–156
assumed, 94
carbon-based fuel technologies, 142
competing standards case, 84
Carlson, Rob, 133
competition
Cassidy, John, 4n4, 117
causing complexity to increase, 150
causes, of exploitive behavior, 105–109
commodity, 78n7
certainty, end of, 171–181
under increasing returns, 83
Chaitin, Gregory, 11n16, 25
between technologies having multiple
Challet, Damien, xvi, 30
potential outcomes, 70
chance, 72, 140
two-party, 100
change. See also structural change
complex features, creating, 119
“avalanches” of cascading through the
complexity
system, 59
associated with nonequilibrium, 7
begetting change, 141
consequences of interactions, 14
Ch’eng Hao, 163
described, 3
Ch’eng Yi, 163
economy and, 182–187, 193
chess playing, inductive behavior in, 32
evolution of, 144–156
Cheung, Sai Hung, 103n1
in the form of greater diversity, 146
choice process, deriving properties of, 75
increasing via generation of new
circuits
niches, 148
constructing from simpler ones, 124
properties of, 15, 17
constructing new, 132
complexity economics
“invented” for simple goals, 125f
compared to equilibrium economics,
novel, 123
24–25
circular causalities, inherent, 148
described, 183, 187
Clark, Andy, 97, 162
different framework for economic
classical game theory, 3
thought, 1–25
clustered volatility, 13
exploring the world of formation, 23
coevolutionary diversity, 145–148, 152
variants of, 2n2
coevolutionary environment, 152
Complexity: Metaphors, Models, and
coevolutionary world, 33
Reality, 144
coevolving systems, 145
complexity outlook, adopting, 184
cognition, 95–98
complexity perspective, in economics, 90
Index [ 197 ]
The Complexity Vision and the Teaching of
causes of, 13
Economics, 158
damaging economists’ beliefs, 40
complex or rich psychological regime,
evidence of temporary, 54
54–59
herd effects causing, 40
complex patterns, 40, 54
occurring from time to time, 43
complex regime, 39, 43, 55f, 62, 180
in the October 1987 stock market, 177
complex systems, as systems in
unexpected, 186
process, 182
creative formation, 22
complicated goals, 129
credit default swaps, 109
complication
cross-correlation, of trading volume with
dealing with, 32
volatility, 59f
increases in, 144
cross-cutting hierarchical organization,
simplicity and, 151
92
computation, 8, 11
computer
Darley, Vince, 95, 96
generating new circuits, 122
Darwin, Charles, xvii, 21, 119, 148
revealing a new world, 25
data
computer experiments
different meanings imposed on the
constructing, 36–37
same, 162
showing emergence of two market
interpretation of, 95, 178
regimes, 51–59
mind as a container holding, 160
computer industry, increase in
David, Paul, 69, 81
diversity, 146
Davis, John, 4n4
computerized market, phases or
“dead” behavior, 17
regimes, 186
deductions, making local in chess, 32
computer laser printer, 18, 147
deductive logic, not used by early
computer models, 112–115, 123
man, 163
concrete economic problems,
deductive rationality, 5–6, 31
identifying, 95
deductive reasoning, 43–46
concurrent behavior, massively parallel
derivatives, financial, 109, 154, 156
system of, 3
descendant technologies, 130
condition array, matching or recognizing
descriptors, summarizing the state of
current market state, 49
the market, 51
condition/forecast rule, 49
designers, multiple working in
connected network, structures arising
parallel, 111
in, 99
design sophistication. See structural
connectionist models, 32n1
depth
constant returns, 74, 76, 77
determinism, 172
consumers, gaming Massachusetts’ 2006
development, locking-in a regrettable
health insurance law, 107
course of, 83
contextual explanations, 100
diagnostic tests, on a model, 52
continual adaptation, 92
diminishing returns, 75–77, 183
conventional economics, studying con-
discovery
sistent patterns, 183
including in a model, 114
correct meaning, determining, 164
of structure, 93
correlated effects, 100
displaced technologies, 137
coverage, doing without, 113
disruptions
Cowan, George, xxiii
drivers of, 6
Cowan, Robin, 69, 82–83
ongoing waves of, 7
crashes
scale and duration of, 13
[ 198 ] Index
distress, cascading, 14
complexity perspective in, 90
distributions, with extreme tails, 101
different principles for the future,
diversity
191–192
collapsing, 152
end of certainty in, 171–181
loss of, 146
as high-complexity science, 192
of strategies increasing, 152
as inherently difficult, 158
tending to grow in a self-reinforcing
inhibiting economists from seeing
way, 145
future potential exploitation, 104
“Down by the Salley Gardens”
two great problems in, 22
(W. B. Yeats), 161–162n1
economic safety, not improved in the last
dream-like world, 167
five decades, 117
Durlauf, Steven, xxiii, 89, 91, 95, 98, 99
Economics Program, at the Santa Fe
dynamical systems approach, 91
Institute, xi, xxiii, xxvi, 39, 89, 90
dynamic model, constructing, 35
economic structures, crystallizing
dynamic programming, 174
around small events, 184
economic theory, 93–95, 160
early adopters, imposing externalities on
economic thought, history of, 168
later, 82
econ
omists, education of, 166
early-start technology, as already locked
economy
in, 77
complexity and, 2–4
Easley, David, 61
constructed from its technologies,
ecological balance, among predictions,
136
185
defined, 19, 135
ecology
different way of seeing, 2
active hypotheses forming, 35
emerging from its technologies, 136
of agents’ beliefs or hypotheses, 185
evolving as technologies evolve,
of beliefs co-evolving over time, 40
134–143
emerging computationally, 10
as an expression of its technologies,
economic agents. See also agents
135–137
adjusting to situations, 182
features presenting difficulties for
forming internal models, 6
traditional mathematics, 92
looking for ways to frame the
in formation, 17–21
situation, 164
fundamental indeterminacy in, 171
as rational optimizers, 93
interpretations of changing constant-
economic behavior, building from
ly, 143
subjective beliefs, 171
locked-in to inferior technology paths,
economic crises, of the last 25 years, 24
71, 81, 134–135
economic disasters, warnings having
as path dependent, 23
little effect, 104
proceeding from its instruments of
economic elements (human agents),
production, 19
reacting with strategy and
process and emergence in, 89–102
foresight, 182
readjusting, 19, 137
economic entities, recursive structure,
showing organic behavior, 181
94
studying process and emergence in, 95
economic historians, view of new
The Economy as an Evolving Complex
technologies, 137
System, 90
economic history, students needing, 168
The Economy as an Evolving Complex
Economic Man, 173
System II, 89, 90
economics. See also complexity
ecosystems, becoming more complex,
economics; equilibrium economics
151
Index [ 199 ]
efficient-market financial theory,
Essay on Man (Pope), 172
assumptions of, 40–41
evolution
Eigen, Manfred, 98
of complexity, 144–156
elements. See also novel elements, adapt-
in its phylogenetic sense, 145
ing to the aggregate pattern, 182
strategies competing for survival, 10
El Farol bar problem, 10n14, 34–37, 36f,
of technology, 142
166, 184–186, 185f
evolutionary market, exhibiting turbulence
emergence
followed by quiescence, 59
determining, 52
evolutionary models, of Blume and
modeling, 112
Easley, 61
of new cognitive and social things,
The Evolution of Complexity (Bonner), 148
94–95
expectational architecture, 50
empirical anomalies, 176
expectational models, 96
enabling technologies, 130
expectational system, implementing, 49
encryption systems, beta testing of, 111
expectations
endogenous expectations, agents’
adjusting, 42
becoming, 42
commonality getting broken up,
endogenous-expectations market,
34–35
exploring computationally, 51
economic agents forming, 93
endogenous-expectation theory, 61
endogenous, 96
engineering, failure mode analysis, 107,
forced to differ, 185
109–110
formed on anticipations of others’
enlightenment thinking, 172
expectations, 62
entities, appearance of new, 147
forming by deductive reasoning,
enzymes, doing the programming, 155
43–46
Epstein, Joshua, xxi, xxiii, 11n15
forming by inductive reasoning, 46–47
equations, doing poorly with new
indeterminate and unstable, 45, 178,
categories, 21
181
equilibrium
individuality emerging over time, 49
conception of becoming untenable
modeling the formation of, 48–51
over time, 23
more successful discovered, 58–59
by definition, 4, 24
recursive character under
dynamical process “selecting” from
heterogeneity, 42
multiple candidates, 83
self-fulfilling, 85
not the natural state of the economy, 5
sources of, 95–96
patterns in, 3
system of temporarily fulfilled, 33
remaining useful as a first-order
treating as hypotheses, 62
approximation, 25
expectations case, 84–85
equilibrium approach, 91
experience, as thick association,
equilibrium economics
166–167
compared to complexity economics,
experimental design, 51–52
24–25
experimental results, 124–126
not primed to look for exploitation of
experimental system, 122–124
systems, 24, 104
experiments
equilibrium finesse, price for, 4
arriving at complicated circuits, 125
ergodicity, in constant and diminishing
with a computer model, 52–53
returns cases, 76
exploitation
ergodic property, 73, 84
emerging in real life, 114
Ermoliev, Yuri, xi, xxiii, 79
by a few well-positioned players, 24
Erwin, Douglas, xxiii
generic categories of, 106
[ 200 ] Index
happening on every scale, 106
forecasting beliefs, 14
modeling, 112–115
forecasting methods, 13
exploitive behavior
forecasting sequence, 84
automatic pre-discovery, 115–116
forecasts, 52, 56
building into a model, 113
foresight horizons, shrinking of, 97
causes and mechanisms of, 105–109
formation
classes of, 103
within the economy, 22–23
in economic and social systems,
economy in, 17–21
103–117
founder effect mechanism, 83
injecting foreseen into the computer
framework, providing, 2
model, 112
framing
not happening at equilibrium, 24
a problem, 159–160
not rare, 106
a situation, 164
at a smaller scale than the overall
free association, 168
system, 110
free markets, unwarranted faith in, 117
exploitive-mode analysis, 117
fuel economy standards, for motor
exploratory actions, 6
vehicles, 109
explosi
ve behavior, 17
functionalities
creating a toolbox of useful, 131
factory, as a means of organization,
new ways of executing, 129
138–139
fundamental uncertainty, 5
factory discipline, 140
future, imagined by each man, 6
failure-mode analysis
futures contracts, of associated
for assessing policy systems, 106
underlyings, 154
in engineering, 107
needed by economics, 103
“gales of destruction,” 120, 122, 130, 130f
failure modes, anticipating, 109–112
game theory, 94, 183
failure-mode studies, 117
gaming, 105, 105n4
failures, of economics in the practical
GARCH (Generalized Auto Regressive
world, 24
Conditional Heteroscedasticity)
families, of related phenomena, 20
behavior
Farmer, Doyne, xxiii, 2n3, 14
characteristic of actual market data,
Farrell, Joseph, 69
43, 62
fast pattern completer, mind as,
in the complex regime, 57
162–164
emerging in the complex regime, 181
feelings, triggering, 160
gas-cooled reactor, given equal
financial derivatives. See derivatives
development, 82
financial instruments, 101
gas-turbine (or jet) aero engine,
financial markets
evolution of, 149–150
characteristics of actual, 57
Geanakoplos, John, xiii, 101
standard theories assuming rational
Gell-Mann, Murray, xi, xxiii
expectations, 186
gene-expression “grammar,” 155
financial time series, patterns of
general equilibrium theory, 3–4, 183
nonlinearity in, 91
general framework, 78–81
fixed points, 79
genetic algorithm, 150, 151f
flexibility property, 73, 76, 84
discarding and creating predictors,
floors, as self-fulfilling prophecies, 178
49–50
focal models, 34, 165
generating “smarter models,” 34
focal predictors, 35
in Santa Fe Market, 63–64
Fontana, Magda, xxiii, 24
varying rate of invocation of, 53n10
Fontana, Walter, 98
genetic code, not changing easily, 156
Index [ 201 ]
genetic material, available for “adaptive
historical footnote, 191–192
radiation,” 148
historical small events, 71, 72, 74
genetic programming, 37
Hobbesian marketplace, 106
genetic sequence, changing easily, 156
Holland, John, xi–xiii, xv, xxiii, 30, 35,
genotype, of a technology, 123
92n3, 133, 147, 150, 179, 186
geographical segregation, emergence
Hommes, Cars, 14, 60
of, 99
homogeneous agents, adoption payoffs
Gintis, Herbert, xxiii
for, 74t
global controller, none, 92
homogeneous equilibrium, 64
Goldman Sachs, package of
Complexity and the Economy Page 35