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From simplistic to complex systems in economics

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  • John Foster

Abstract

The applicability of complex systems theory in economics is evaluated and compared with standard approaches to economic theorising based upon constrained optimisation. A complex system is defined in the economic context and differentiated from complex systems in physio-chemical and biological settings. It is explained why it is necessary to approach economic analysis from a network, rather than a production and utility function perspective, when we are dealing with complex systems. It is argued that much of heterodox thought, particularly in neo-Schumpeterian and neo-Austrian evolutionary economics, can be placed within a complex systems perspective upon the economy. The challenge is to replace prevailing 'simplistic' theories, based in constrained optimisation, with 'simple' theories, derived from network representations in which value is created through the establishment of new connections between elements. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 29 (2005)
Issue (Month): 6 (November)
Pages: 873-892

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Handle: RePEc:oup:cambje:v:29:y:2005:i:6:p:873-892

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  1. Cowan,Robin & Jonard,Nicolas, 1999. "Network Structure and the Diffusion of Knowledge," Research Memorandum 026, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
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  13. Foster, John, 1997. "The analytical foundations of evolutionary economics: From biological analogy to economic self-organization," Structural Change and Economic Dynamics, Elsevier, vol. 8(4), pages 427-451, October.
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