|
Article |
From simplistic to complex systems in economics
* The University of Queensland
Address for correspondence: School of Economics, The University of Queensland, Brisbane, QLD 4072, Australia; email: j.foster{at}economics.uq.edu.au
Abstract
The applicability of complex systems theory in economics is evaluated and compared with standard approaches to economic theorising based upon constrained optimisation. A complex system is defined in the economic context and differentiated from complex systems in physio-chemical and biological settings. It is explained why it is necessary to approach economic analysis from a network, rather than a production and utility function perspective, when we are dealing with complex systems. It is argued that much of heterodox thought, particularly in neo-Schumpeterian and neo-Austrian evolutionary economics, can be placed within a complex systems perspective upon the economy. The challenge is to replace prevailing simplistic theories, based in constrained optimisation, with simple theories, derived from network representations in which value is created through the establishment of new connections between elements.
Key Words: Complex adaptive system Complex system Complex dynamics Evolutionary economics Logistic diffusion Process optimisation
JEL classifications: B41, B52, B53, D20, D83, D85, L14, O33
Manuscript received December 1, 2003; final version received August 31, 2004.