Coping with the Complexity of Economics

Coping with the Complexity of Economics

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Throughout the history of economics, a variety of analytical tools have been borrowed from the so-called exact sciences. As Schoe?er (1955) puts it: a€œThey have taken their mathematics and their ded- tive techniques from physics, their statistics from genetics and agr- omy, their systems of classi?cation from taxonomy and chemistry, their model-construction techniques from astronomy and mechanics, and their methods of analysis of the consequences of actions from en- neeringa€. The possibility of similarities of structure in mathematical models of economic and physical systems has been an important f- tor in the development of neoclassical theory. To treat the state of an economy as an equilibrium, analogous to the equilibrium of a mech- ical system has been a key concept in economics ever since it became a mathematically formalized science. Adopting a Newtonian paradigm neoclassical economics often is based on three fundamental concepts. Firstly, the representative agent who is a scale model of the whole society with extraordinary capacities, particularly concerning her - pability of information processing and computation. Of course, this is a problematic reduction as agents are both heterogeneous and bou- edly rational and limited in their cognitive capabilities. Secondly, it often con?ned itself to study systems in a state of equilibrium. But this concept is not adequate to describe and to support phenomena in perpetual motion.1. Aigner D. J., Hsiao C., Kapteyn A., Wansbeek T., (1984). Latent variable models in econometrics. In: Griliches, Z., Intriligator, M.D., ... Barriers and Bounds to Rationality: Essays on Economic Complexity and Dynamics in Interacting Systems. ... Estimating the underground economy using MIMIC models, working paper, Canberra, Australia ... Investigating the Complexity of Middle Grade Studentsa#39; Understandings of Mathematical Constructs: An Example from Graphic Representation.

Title:Coping with the Complexity of Economics
Author:Marisa Faggini, Thomas Lux
Publisher:Springer Science & Business Media - 2009-05-05


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