In 2006, New York Fed economists began to worry that the U.S. housing market was overheating. Worried that the bubble would burst, they used their best models to predict what would happen if house prices fell by 20%. Not that much, that was the bulk answer. Immediately thereafter, house prices fell by almost this amount, ushering in perhaps the worst global economic downturn in 100 years.
Economics is often accused of being a pseudoscience with elaborate formulas that betray subjectivity and a poor track record of making accurate predictions. J. Doyne Farmer We think we can do better. In his new book, understand chaosHe reveals why standard economic approaches often fail and offers radical alternatives. Complexity economics treats the economy as a system. similar to natural ecosystem Or the Earth's climate. Giant computer simulations based on these ideas better represent how billions of people interact within the global economy.
Mr. Farmer currently holds positions at Oxford University and the Santa Fe Institute in New Mexico, but his path to economics was unconventional. It started with him dropping out of graduate school, building the world's first wearable computer, and using it to win casinos at roulette. In the 1990s he founded his Prediction Company and applied similar principles to the stock market. A pioneer in chaos theory and complex systems, he believes that complexity economics has recently come into its own and is making reliable predictions about what's next.
Source: www.newscientist.com
