- Modular-Finance Theory
- The Modern World
- Twin Peaks
- The ModularWorld
- The MetaWorld
- Complex Adaptive Systems
- The Origin of Complexity Economics
- Complexity and The Financial System
- Systems Thinking
- Orgel's Rules
- Behavioral Finance
- Evolutionary Psychology
- Slothosaurus Rex
- The Next Level...
- Complexity Economics
- Machine Learning
- Big Data
- The Spiky World
Complex Adaptive Systems
Ant colonies, bird flocks, rain forests, business, organizations, communities the stock market and the global economy all have something in common. They are complex adaptive systems. Complex means composed of many parts which are joined (literally "twisted) together. Adaptive refers to the fact that all living systems dynamically adapt to their constantly changing environments as they strive to survive and thrive. And Systems means everything is interconnected and interdependent.
"Complexity" represents the middle area between static order on one end and chaos at the other. Thus complexity is sometimes called the edge of chaos. If we think of static order as ice and chaos as water vapor, complexity would be liquid water. Using powerful computers, scientists from a wide range of fields - including a number of Nobel prize winners - have developed computer models that simulate - on the screen - the evolution and changes that occur as complex adaptive systems move, adapt, survive and thrive - or - if their strategies are wrong - die.
Unlike non-adaptive complex systems, like the weather, complex adaptive systems have the ability to internalize information, to learn, and to modify their behavior (evolve) as they adapt to changes in their environments. In other words, they have brains, they are intelligent systems.
Hat tip ~ Codynamics - www.codynamics.net
Complexity Economics -
Complexity Economics is the application of Complexity Science to the Problems of Economics. It is one of the four C's of a new paradigm surfacing in the field of economics. The four C's are Complexity, Chaos, Catastrophe and Cybernetics.
Top Down or Bottom Up?
The Answer is:
C. - Both
We often try to understand problems by taking them apart and studying their constituent parts. But emergent problems can't be understood this way. Emergent systems are ones in which many elements interact. The pattern of interaction then produces a new element that is greater than the sum of the parts, which then exercises a top-down influence on the constituent elements.
Culture is an emergent system. A group of people establish a pattern of interaction, and once that culture exists it influences how the people in it behave. An economy is an emergent system. So is political polarization, rising health care costs and a bad marriage. Financial markets are also systems that exhibit and reflect emergent behavior.
Emergent systems are bottom-up and top-down simultaneously. They have to be studied differently, as wholes and nested networks of relationships.We still try to address problems like poverty, economic growth and job creation by trying to tease out individual causes. We might make more headway, if we thought emergently.
Hat Tip ~ David Brooks, The big Think