Complexity

Journal of Economic Perspectives—Volume 13, Number 4 —Fall 1999 —Pages 169 –192

On the Complexities of Complex
Economic Dynamics
J. Barkley Rosser Jr.

I

n recent years, considerable attention and publicity have emerged regarding
studies of “complexity” in a variety of disciplines, including economics (Waldrop, 1992; Lewin, 1992). Some of this publicity has made dramatic claims
thatnew approaches have arisen that are applicable across many disciplines and
that promise fundamental new insights into these disciplines, with economics being
one of the main disciplines drawing such research effort and attention. These
approaches evolved out of earlier work using nonlinear dynamics and have been
used to explain such phenomena as path dependence in technological evolution
andregional development and the appearance of discontinuities, such as the
crashes of speculative bubbles or the collapses of whole economic systems. Major
centers of this research effort have included earlier the Free University in Brussels,
Belgium, Stuttgart University in Germany, and later the Santa Fe Institute in New
Mexico. This paper examines the nature and development of this researchprogram in economics.
Referring to researchers at the Santa Fe Institute, Mitchell Waldrop (1992,
pp. 12–13) declares, “[T]hey all share the vision of an underlying unity, a common
theoretical framework for complexity that would illuminate nature and humankind
alike . . . They believe that their application of these ideas is allowing them to
understand the spontaneous, self-organizing dynamicsof the world in a way that no
one ever has before—with the potential for immense impact on the conduct of
economics, business, and even politics . . . They believe they are creating, in the
words of Santa Fe Institute founder George Cowan, ‘the sciences of the twenty-first
century.’”

y J. Barkley Rosser Jr. is Professor of Economics and Kirby L. Kramer Jr. Professor, James
MadisonUniversity, Harrisonburg, Virginia. His e-mail address is rosserjb@jmu.edu .

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In contrast, John Horgan (1995, 1997) ridicules what he labels “chaoplexology,” arguing that complexity is the latest in a series of failed fads, the “four C’s” of
cybernetics, catastrophe, chaos, and complexity. He writes (1997, p. 226): “So far
chaoplexologists have created somepotent metaphors: the butterfly effect, fractals,
artificial life, the edge of chaos, self-organized criticality. But they have not told us
anything about the world that is both concrete and truly surprising, either in a
negative or in a positive sense.”
These sharply contrasting viewpoints reflect the controversy surrounding the
multidisciplinary study of complexity, as well as its predecessorsin a line of
development within the broader science of nonlinear dynamics that includes the
earlier C’s. Is it (and them) a fundamental, paradigm-shifting breakthrough, or just
a fallacious fad hyped by grant-grubbing academics and journalists seeking bestsellers? Waldrop and Horgan are both best-selling science journalists, which may
explain the extremity of their views. Neither is aneconomist, although Waldrop
writes more about economics than does Horgan. We shall attempt to sort out the
substance from the hype in applications to economics of this claimed new “science
of complexity.”

What is Complexity? A Broad Tent View
Unsurprisingly, there is no agreed-upon definition of such a complex term as
“complexity.” Indeed, MIT’s Seth Lloyd has gathered over 45 such definitions, mostof these listed in Horgan (1997, Chapter 8, footnote 11, p. 303), with many of these
definitions emphasizing computational or informational measures. This plethora
leads Horgan (1995) to complain that “we have gone from complexity to perplexity.” Without doubt, this is a serious problem.
A “broad tent” definition, following Richard H. Day (1994), is that a dynamical
system is complex if it...