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- Title
From simplistic to complex systems in economics.
- Authors
Foster, John
- 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.
- Subjects
ECONOMICS; PRODUCTION (Economic theory); UTILITY functions; MATHEMATICAL optimization; EVOLUTIONARY economics; ECONOMIC models
- Publication
Cambridge Journal of Economics, 2005, Vol 29, Issue 6, p873
- ISSN
0309-166X
- Publication type
Article
- DOI
10.1093/cje/bei083