Episode 2: Complexity and Chaos System

The Santa Fe Institute’s Economics program views the economy as a complex system. The sources state that the program was founded in 1988 to encourage research into the economy using the tools of complexity science. This means that the program rejects the standard economic assumptions of perfect rationality, equilibrium, diminishing returns, and independent agents. Instead, the program sees the economy as a system that is constantly evolving, with agents who are constantly adapting to their environment. The program as a "process-and-emergence perspective". This means that the program is interested in how new things arise in the economy, such as new technologies, new institutions, and new patterns of behavior. The program has a history of pioneering research in complexity economics. The sources explain that the program’s research has produced new insights into several fields, such as artifact innovation, the evolution of trading networks, finance, and the spatial distribution of cities. The program has also made significant contributions to our understanding of phenomena such as technological lock-in and the emergence of market psychology. The program offers a different way of seeing the economy. The sources say that the program's complexity perspective gives a different view of the economy, one where actions and strategies constantly evolve, where time becomes important, where structures constantly form and re-form, where phenomena appear that are not visible to standard equilibrium analysis, and where the interactions between the micro and the macro levels become important. This new view of the economy is closer to that of political economy than to neoclassical theory.