140–143
subsets of mutually reinforcing, 180
procedural theory, 21–22
predictor accuracy, 59, 63
procedure, properties of, 174
predictors
process-and-emergence viewpoint, 95
“alphabet soup” of, 36
processes
clustering in the more visited parts of
through which structure emerges, 93
the market state space, 50
triggered by other processes, 21
forecasting part of each, 49
process-oriented complexity approach,
forming for bar problem, 35
184
luck in finding good diverging over
profitable expectations, discovering, 42
time, 61
program output level, adaptation of, 154
multiplicity of, 50
propagations, of events causing further
needing to “cover” the available
events, 15
prediction space, 37
properties, definitions of, 84
recognizing many states of the
psychological behavior, emerging, 61
market, 49
psychological change, structural change
self-organizing, 36, 37, 185
causing, 140
subjective expectational models
psychology, market possessing, 47
represented by sets of, 49
Ptolemaic astronomy, collapse of, 151
turning off the condition part of all,
57
qualitative phenomena, associated with
premature association, as disastrous,
the complex regime, 59
168
QWERTY typewriter keyboard, 81, 81n9
preventive medicine and disease control,
looking to future prevention, 107
radio broadcasting, elements making
price
possible, 120
driven endogenously by induced
railway locomotive, construction of, 19
expectations, 42
random events, allowing the possibility
as a function of expected future
of, 70
dividends, 177
random predictors, agents initialized by
price bubbles, 178, 186. See also bubbles
seeding with, 64
price statistics, in the complex regime,
random walks, 75, 76, 85
54
rating agency’s models, gaming, 108
price volatility, 40, 57
rational expectations, 30, 78, 171, 174,
principal-agent model, 167
176
principles, of the new economics,
rational expectations economics, 3, 183
191–192
rational expectations equilibrium, 14,
prisoner’s dilemma
52, 53n11, 84
model, 111, 167
rational-expectations regime, 42, 53, 180
strategies meeting randomly and
rational-expectations theory, as a special
cumulate profit by playing, 152
case, 181
privileged information, profiting from,
rationality
107
arguing against conventional notions
probabilistic cloud, surrounding existing
of, 96
technologies, 128
not well defined, 5–6
probability, of each technology’s being
perfect or deductive demanding much
chosen, 78
of human behavior, 31
Index [ 207 ]
rational solution, accomplishing, 159
Samuelson, Paul, 4–5, 69
Ray, Tom, 147
“Santa Fe approach,” emerging within
realism, shift in attitude in the direction
economics, 91
of, 24
Santa Fe Artificial Stock Market, 13, 39,
reality, idealized, rationalized world
42, 63–65, 66, 166
distorting, 4
Santa Fe Institute, x, xxiii, 2, 89, 183
real phenomena, understanding of, 100
Sargent, Tom, x, xiv, xxiii, 6, 46n7, 166
real world, subject to fundamental
Scheffer, Martin, 14n19
uncertainty, 171
schemata, 31, 150
reasoning, depending on the past
Schumpeter, J. A., xxi, 6, 18, 23, 120,
experiences of the reasoner, 164
130, 141
recombination, of predictor arrays, 50
Schuster, Peter, 98, 133
recursive loop, connecting with
sciences, becoming more procedural and
complexity, 3
less equation-based, 25
reflexivity, 5n7, 62, 62n17
securities, backed by the underlying, 154
regimes
self-creation, perpetually in a process
properties of, 75–77, 76t
of, 141
two different, 53
self-referential character, of
regime transitions, from equilibrium to
expectations, 62
complexity to chaos, 14
self-referential loop, 175
Reisman, David, xxiii, 5n5
self-reinforcing asset-price changes, 13
replacement
Shackle, 5, 6, 23
avalanches of, 122
Shapiro, Carl, 78
causing the collapse of technologies
Shepard, Roger, 30
backward, 130
short memory/short foresight adaptive
research directions, emerging, 95–102
mode, 97
research program, building, 95
Shubik, Martin, xxiii, xxiv, 69, 95, 100,
returns, affecting predictability, effi-
101
ciency, flexibility, and ergodicity, 71
signaling, driving the observed patterns,
returns regimes, interpretation of
57
economic history different in
simple regime, corresponding to
different, 82
rational-expectations
reversals, 150
equilibrium, 62
Ricardo, David, 143
simplicity, bursts of cutting through
rich psychology, market settling into, 96
growing complexity, 151
Rieck, C., 66
Simpson, D., 4n4
risk-free bonds, 47
simulations, future dipping into history,
Robinson, Joan, 23
116
Rosenberg, Nathan, xxiii, 69, 70n2
single-technology dominance, theorem
Rosser, J. B., 2n3
on, 80
Rothmaier, Daria, 103n1
slow-learning-rate experiments, 53
rules of the game, 100
small-event history, determining the
Rumelhart, David, 30
tipping process, 77
Russell, Bertrand, 158, 162–163
small events outside the model,
Russia, players seizing control of state’s
influencing adoptions, 78
newly freed assets, 104
Smith, Adam, xxi, 3, 22, 143, 172, 173
Russians, not arriving with empty minds
Smolin, Lee, xxiii, 23
to their version of capitalism, 169
social and economic systems, incentives
Rust, John, xv, xxiii, 159
inducing further behavior, 117
[ 208 ] Index
social character, of human interactions,
strategic market games, 101
98
strategic options, constructing for the
social d
imension, of cognition, 97
agents, 110–111
social interactions, recurring patterns
strategies
of, 98
ecology of, 10
social roles, economic action is
evolving in a game-theoretic setting,
structured by emergent, 94
152
social system, stress testing a design for,
strategy modules, soliciting, 111
110
stress testing, policy designs, 117
Solow, Robert, 18
structural change, 4, 21n27, 22, 134,
solution-formulation, 150
137–141, 143
solutions
structural deepening, 148–152
in economics, 25
structural depth, 149, 151f
imagining, 116
structural foundations, 94
needing to be generated by
structure
computation, 166
creation and re-creation, 18
Soros, George, 5n7, 13n18, 40n4, 62n17
of the economy, 136
Soviet Union, going capitalist in
emerging, 20, 56, 93
1990-90, 169
formation of, 3
spatiotemporal structures, forming of,
of human interactions, 98–101
99
sub-assemblies, of technologies, 18
sponsoring firms, appropriating later
subjective beliefs
payoffs, 83n12
about subjective beliefs, 31
spontaneous onset, of a phenomenon,
changes in rippling through the
12
market, 186–187
standard efficient markets theory, 176
differing among agents, 32
standard finance theory, 186
economy emerging from, 181
standards, 78
forming, 5
standard theory, facing unexplained
subjective expectations, repeated
phenomena, 176
iteration of, 45
standing reserve, 126, 127f
subschemas, hierarchy of collapsing, 150
stasis, economy never quite at, 141
subsystems, 149
states of the economy, aggregate-level, 91
sudden percolation, 14
state space, changing with time, 91n2
sun, never at equilibrium, 9
state variables, emergence of new kinds
symbiotic clusters, of entities, 147
of relevant, 91
syntax, understanding of, 160
static equilibrium approach, stymied by
synthetic biology, 124
indeterminacy, 184
systems
static outlook, shifting into a process
capturing simpler elements, 156
orientation, 184
with multiple elements, 182
statistical anomalies, explained in the
outcomes for highly interconnected, 8
standard theory, 177
taking partial control of, 108–109
Stiglitz, Joseph, 41, 47
stochastic dynamic programming, 159
Tabb, William, xxiii, 21n27, 23, 117
stochastic process(es), 11, 47, 78, 85,
Tayler, Paul, xxiii, 39, 95, 179, 186
93, 184
technical analysis, 57
stock market, asset pricing in an
technical trading, 176
artificial, 39–66
emerging, 42, 54
stock returns, containing small, but
heavy use of, 186
significant serial correlations, 40
signals, 57
strategic agents, 111
test for the emergence of, 51
Index [ 209 ]
technological change, as a driver of
as metaphors with entailments, 166
disruption, 6
not consisting of mathematics, 10
technological disruption, compared to
as thin associations, 166
Brownian motion of uncertainty, 7
theory of the firm, 98
technology (technologies). See also novel
thick associations, 166–167
technologies
thin associations, 166, 167
building itself out of itself, 119
thinking
build-out of, 126–129
associatively, 163
competing for a “market” of potential
inductively, 31–34
adopters, 70
Tierra system, 147
constructed from components, 120
time, rethinking the issue of, 23
creating, 120n2, 121
timing, in the market, 48
defined, 18, 120, 136
Tordjman, H., 66
demand for, 19
trade, motivation to, 60
destroying neatness, 173
traders
displaying increasing returns to
seeing markets as offering speculative
adoption, 70
opportunities, 40
each containing the seeds of a
view justified by invoking behavioral
problem, 142
assumptions, 62
encountered by industries, 20
trade unions, 139
evolution within a simple computer
trading volume
model, 119–133
in real markets, 40
expression of, 19
showing persistence or
gaining self-reinforcing advantage, 80
autocorrelation, 57
key used heavily to directly construct
traffic flow, simple model of, 12
new, 129f
transfer process, 34
locking in to one technology only, 75
transient phenomena, 94–95
as main agent of change in the
truth tables, 123
economy, 18
Turing, Alan, 8, 11n15, 25
putting in the foreground, 18
as self-producing or autopoietic, 120n2
uncertainty, 5, 7, 93, 172–175
simple model of two new, 71
fundamental, ix, xx, xxi, 5, 158, 171
sponsored by firms, 77–78
unconscious associations, 168
technology-based evolution, 131
underlyings, 154, 156n3
technology change, 173
uninsured, opting in and out of coverage, 113
technology-creating-the-
unitary cognitive foundation, of
economy-creating-technology, 137
neoclassical economic theory, 93
temporal phenomena, 9, 12–14, 16
unstable equilibrium, positions of, 4–5
Tesfatsion, Leigh, xxi, xxiii, 95, 98–99,
user technologies, each technology
102
linking to, 129
textile factory or mill, as a higher level
US invasion of Iraq, generated
organizational arrangement, 137
insurgency, 106
thematic challenges, calling forth novel
solutions, 21
Veblen, Thorstein, 23
theoretical limits, to the predictability of
verb-actions, economics shifting
the economic future, 83
toward, 25
theories
Victorian industrial economy, emergence
applying prematurely as dangerous,
of, 139
167–168
volatility, 13, 58f
becoming the understanding of
von Ohain, Hans, 149
mechanisms, 25
Vriend, Nick, 30
[ 210 ] Index
Waddington, C. H., 148
Wolfram,
Stephen, 8
Waldrop, Mitchell, 2n2
working class, demanding a larger share
Wall Street firms, getting better
of the wealth, 139
ratings, 108
Wright, Gavin, 69
Walras, Léon, 5n5, 94
Watts, Duncan, 14
Yeats poem, 161–162
The Wealth of Nations (Smith), 172
Whittle, Frank, 149
Zhang, Yi-Cheng, xvi, 30
Whittle’s jet engine, 151
Zurcher, Harold, 159
Index [ 211 ]
Document Outline
Cover
Series
Complexity and the Economy
Copyright
Dedication
Contents
Preface
Acknowledgments
1 Complexity Economics: A Different Framework for Economic Thought
2 Inductive Reasoning and Bounded Rationality: The El Farol Problem
3 Asset Pricing under Endogenous Expectations in an Artificial Stock Market
4 Competing Technologies, Increasing Returns, and Lock-In by Historical Events
5 Process and Emergence in the Economy
6 All Systems Will Be Gamed: Exploitive Behavior in Economic and Social Systems
7 The Evolution of Technology within a Simple Computer Model
8 The Economy Evolving as Its Technologies Evolve
9 On the Evolution of Complexity
10 Cognition: The Black Box of Economics
11 The End of Certainty in Economics
12 Complexity and the Economy
An Historical Footnote
Other Papers on Complexity and the Economy
Index
Complexity and the Economy Page 37