The Unfortunate Complexity Of The Economy
Here’s a very interesting read on the complexity of economics and our current situation.The paper also addresses the contributions of physics to economics, etc. Enjoy!
Abstract (Via Arxiv.Org)
By: JP Bouchaud
This article is a follow-up of a short essay that appeared in Nature 455 1181 (2008). It has become increasingly clear that the erratic dy- namics of markets is mostly endogenous and not due to the rational processing of exogenous news. I elaborate on the idea that spin-glass type of problems, where the combination of competition and heterogeneities generically leads to long epochs of statis interrupted by crises and hyper-sensitivity to small changes of the environment, could be metaphors for the complexity of economic systems. I argue that the most valuable contribution of physics to economics might end up being of methodological nature, and that simple models from physics and agent based numerical simulations, although highly stylized, are more realistic than the traditional models of economics that assume rational agents with inﬁnite foresight and inﬁnite computing abilities.