Abstract
In this paper, we provide a brief overview of the field of complexity
research in economics, and discuss directions of research that we
consider to be promising in terms of solving open issues. We start the
survey of the field with the research that emerged in the 1990s, when
under the influence of earlier developments in the natural sciences
(e.g., thermodynamics and chaos theory), the term complexity became in
fashion to refer to theoretical ideas about how "ordered" patterns at an
aggregate level can emerge from interaction between heterogenous agents
at the microeconomic level. This gave rise to the notion of
self-organization in dissipative systems, or "order at the edge of
chaos" to describe economic dynamics. Because disequilibrium plays a
large role in these theories, these ideas worked very well in
combination with a Schumpeterian view of the economy, which also
stresses disequilibrium.
In the current literature, economic complexity is mainly used to refer
to the application of quantitative methods based on networks that can be
created on the basis of very fine-grained data on production or trade.
These data are used to produce aggregate measures of development, as
well as to describe how production structures may evolve over time. This
literature developed largely disconnected to the earlier complexity
literature. The new economic complexity paradigm is largely void of
economic theory, and instead aims to provide a set of data reduction
techniques that are used to characterize development.
With regard to outlook for complexity research in (Schumpeterian)
economics, on the one hand, we feel that the potential for analyzing the
economy as a dissipative, out-of-equilibrium system has not been fully
exploited yet. In particular, we propose that - in line with the field
of "Big History" (which aims to describe and analyze a coarse history of
the universe since the Big Bang) - there is work to be done on the
larger issues in economics, in particular climate change and
sustainability.
research in economics, and discuss directions of research that we
consider to be promising in terms of solving open issues. We start the
survey of the field with the research that emerged in the 1990s, when
under the influence of earlier developments in the natural sciences
(e.g., thermodynamics and chaos theory), the term complexity became in
fashion to refer to theoretical ideas about how "ordered" patterns at an
aggregate level can emerge from interaction between heterogenous agents
at the microeconomic level. This gave rise to the notion of
self-organization in dissipative systems, or "order at the edge of
chaos" to describe economic dynamics. Because disequilibrium plays a
large role in these theories, these ideas worked very well in
combination with a Schumpeterian view of the economy, which also
stresses disequilibrium.
In the current literature, economic complexity is mainly used to refer
to the application of quantitative methods based on networks that can be
created on the basis of very fine-grained data on production or trade.
These data are used to produce aggregate measures of development, as
well as to describe how production structures may evolve over time. This
literature developed largely disconnected to the earlier complexity
literature. The new economic complexity paradigm is largely void of
economic theory, and instead aims to provide a set of data reduction
techniques that are used to characterize development.
With regard to outlook for complexity research in (Schumpeterian)
economics, on the one hand, we feel that the potential for analyzing the
economy as a dissipative, out-of-equilibrium system has not been fully
exploited yet. In particular, we propose that - in line with the field
of "Big History" (which aims to describe and analyze a coarse history of
the universe since the Big Bang) - there is work to be done on the
larger issues in economics, in particular climate change and
sustainability.
| Original language | English |
|---|---|
| Publisher | UNU-MERIT |
| Publication status | Published - 7 Jul 2022 |
Publication series
| Series | UNU-MERIT Working Papers |
|---|---|
| Number | 023 |
| ISSN | 1871-9872 |
JEL classifications
- b52 - "Current Heterodox Approaches: Institutional; Evolutionary"
- o30 - "Technological Change; Research and Development; Intellectual Property Rights: General"
- o31 - Innovation and Invention: Processes and Incentives
- o33 - "Technological Change: Choices and Consequences; Diffusion Processes"
Keywords
- Complexity
- Complex systems
- Economic dynamics
- Schumpeterian economics
- Disequilibrium dynamics
- Economic complexity index