Barkley Rosser

• James Madison University

Shu-Heng Chen was a deep student agent-based computational economics. He considered underlying issues arising with this approach including how it relates to experimental economics and behavioral economics. Herbert Simon founded behavioral economics and developed the concept of bounded rationality arising from the limits of knowledge of agents, the...

This paper presents the ideas of the late Tönu Puu regarding how arts, sciences, and economics interact and coevolve. This involves complex nonlinear dynamics with critical bifurcations occurring at crucial points that transform the paradigm or system involved. Centrally important is how influences from one area influence another, even from the art...

This paper examines relations between econophysics and the law of entropy as foundations of economic phenomena. Ontological entropy, where actual thermodynamic processes are involved in the flow of energy from the Sun through the biosphere and economy, is distinguished from metaphorical entropy, where similar mathematics used for modeling entropy i...

The term econophysics was neologized in 1995 at the second Statphys-Kolkata conference in Kolkata (formerly Calcutta), India by the physicist H. Eugene Stanley, who was also the first to use it in print (Stanley 1996). Mantegna and Stanley (2000, pp. viii–ix) define “the multidisciplinary field of econophysics” as “a neologism that denotes the acti...

The neoclassical era in economics has ended. Based on the views presented in this book, I think an argument can be made that it has been replaced by the the complexity era. This new era has not arrived through a revolution. Instead, it has evolved out of the many strains of neoclassical work, along with work done by less orthodox mainstream and het...

The late Elinor Ostrom was the person who most clearly saw through the supposed dilemma called the “tragedy of the commons” (Hardin 1968; Ostrom 1990). It was widely argued that managing common property resources was an impossible proposition, that either common property is privatized in some way or else there will be an inevitable tendency for the...

Since at least the early efforts of Alan Wilson (1967, 1970), the idea of using the law of entropy to assist in modeling the development of urban and regional spatial structural patterns has been influential. To understand how this has been done and how useful it is as an approach, we must first consider the various formulations of that law that ha...

How large the non-observed economy (NOE) is and what determines its size in different countries and regions of the world is a much studied question (Schneider and Enste, 2000, 2002). The size of this sector in an economy has important ramifications. It negatively affects a nation’s ability to collect taxes to support its public sector, which can le...

Herbert A. Simon developed the idea of boundedrationality from his earliest works (Simon 1947, 1955a, 1957), which is viewed as the foundation of modern behavioral economics. Behavioral economics contrasts with more conventional economics in not assuming full information rationality on the part of economic agents in their behavior. In this regard,...

There are at least 45 definitions of complexity according to Seth Lloyd as reported in The End of Science (Horgan, 1997, pp. 303–305). Rosser Jr. (1999) argued for the usefulness in studying economics of a definition he called dynamiccomplexity that was originated by Day (1994). This is that a dynamical economic system fails to generate convergence...

Inspired by the work of Stefano Zambelli on these topics, this chapter studies the complex nature of the relation between technology and computability. This involves reconsidering the role of computational complexity in economics and then applying this to a particular formulation of the nature of technology as conceived within the Sraffian framewor...

This book presents a survey of the aspects of economic complexity, with a focus on foundational, interdisciplinary ideas. The long-awaited follow up to his 2011 volume Complex Evolutionary Dynamics in Urban-Regional and Ecologic-Economic Systems: From Catastrophe to Chaos and Beyond, this volume draws together the threads of Rosser’s earlier work o...

While Austrian economists and their models were only indirectly involved in the Cambridge capital theory controversies that came to a dramatic head in 1966, certain ideas argued for by the Cambridge, UK side were prefigured in some work by Austrian economists, especially F.A. Hayek in his 1941, The Pure Theory of Capital, which he wote largely as a...

In sympathy with work of Akio Matsumoto, this essay reviews models that consider how the coupling of systems within ecologic-economic contexts can generate not only chaotic dynamics, but lead to outcomes that exhibit kurototic outcomes rather than reflecting Gaussian distributions. This aligns with arguments made by Martin Weitzmann regarding the g...

We consider the implications for general equilibrium theory of the problems of consistency and completeness as shown in the Gödel-Rosser theorems of the 1930s. That a rigorous consistent formal system is incomplete poses serious problems for dealing with unresolved problems in a fully formal system such as general equilibrium theory. We review the...

Considering macroeconomies as systems subject to stochastic forms of entropic equilibria, we shall consider how deviations driven by positive feedbacks as in a speculative bubble can drive such an economy into an anti-entropic state that can suddenly collapse back into an entropic state, with such a collapse taking the form of a Minsky moment. This...

This article gives an appraisal of the work of David Colander. After a brief biographical summary, we look at his work in methodology and the role that institutions and ‘vision’ play in his economic analysis. A crucial part of his work in this area is viewing not only the economy but also the economic profession as an adaptive complex system. This...

This essay considers how behavioural economics and institutional economics have coevolved in their development, with understanding their links central to understanding how evolutionary processes within economies dynamically develop. Key to this is that a most important function of economic institutions is to aid humans in overcoming the limits impo...

Entropy is a central concept of statistical mechanics, which is the main branch of physics that underlies econophysics, the application of physics concepts to understand economic phenomena. It enters into econophysics both in an ontological way through the Second Law of Thermodynamics as this drives the world economy from its ecological foundations...

This paper shows which portions of complexity theory are most relevant for studying economic institutional evolution. This question leads to both the two main competing economics complexity theories: dynamic and computational complexity. Central to this is the concept of cumulative causation, invented by a main founder of institutional economics, T...

This chapter will consider the importance of Herbert A. Simon as both the discoverer of the idea of bounded rationality and its role in modern behavioral economics and as one of the early developers of complexity theory, especially its hierarchical and computational forms. Bounded rationality was essentially derived from Simon?s view of the impossi...

The possible presence of nonlinear speculative bubbles in the Karachi stock exchange (KSE) is examined since 1992. We use methodology previously used by the authors for examining asset market dynamics for this study. Bubbles are argued to exist when there are substantial deviations of market value from extimated fundamental values. For daily values...

This paper considers Confucian influence in the economic systems of North and South Korea within the context of the context of the new traditional economy, introduced by the authors initially in 1996. Such an economy seeks to be modern technologically and in other ways, but also is embedded to some extent within a traditional socio-cultural traditi...

This paper studies the relationships between the concepts of ergodicity, stationarity, homogeneity, and Keynesian fundamental uncertainty in light of a recent debate between Rod O’Donnell (2014–15) and Paul Davidson (2015). The latter has long argued that Keynesian fundamental uncertainty is best viewed as an axiomatic ontological condition of none...

This paper will consider the relationship between complexity economics and behavioral economics. A crucial key to this is to understand that Herbert Simon was both the founder of explicitly modern behavioral economics as well as one of the early developers of complexity theory. Bounded rationality was essentially derived from Simon's view of the im...

Political economies evolve institutionally and technologically over time. This means that to understand evolutionary political economy one must understand the nature of the evolutionary process in its full complexity. From the time of Darwin and Spencer natural selection has been seen as the foundation of evolution. This view has remained even as v...

Daily price movements of seventeen commodities are tested for the possible presence of nonlinear speculative bubbles during 1991-2012. A VAR model for logarithmic first differences of each is estimated with one-year Treasury bill rates, U. S. dollar value, a world stock market index, and an overall commodities price index using Hamilton regime swit...

Ecologic-economic systems tend to exhibit greater complexity than systems that are purely ecological or economic. The interactions between the two types often generates nonlinear relations that lead to various kinds of complex dynamics that complicate management and decisionmaking regarding them. Of these, forests have characteristics that lead the...

We explore the standard expected utility model and alternatives to it. We then examine the behavioral and neurological evidence for hyperbolic discounting. We discuss evidence related to the neurological and behavioral evolution of discounting in non-human animals and in humans. We explore new findings about the importance of sociality in human beh...

Hyman Minsky and Charles Kindleberger discussed three different patterns of speculative bubbles, all of which appeared during the recent financial crisis: one when price rises in an accelerating way to crash sharply after reaching its peak as with oil peaking in July 2008, another when the price rise is followed by a parallel decline without crash...

Kumaraswamy Vela Velupillai74 presents a constructivist perspective on the foundations of mathematical economics, praising the views of Feynman in developing path integrals and Dirac in developing the delta function. He sees their approach as consistent with the Bishop constructive mathematics and considers its view on the Bolzano-Weierstrass, Hahn...

In this chapter natural evolution, based on selection and adaptation, is compared with social and economic systems, evolving under the pressure of human decision making. These complex adaptive processes lead to emergence of global hierarchies that emerge from local interactions leading to self-organizing dynamics. The analysis starts with the evalu...

Emergence is often argued to be a deep property of complex systems, with such systems exhibiting wholes that are in some way greater than the sum of their parts. These ideas have played an important part in discussions of spontaneous order within Austrian economics, particularly by Hayek drawing on arguments dating from Mill and Menger, although wi...

Perhaps more than any other human institution, the city reflects the tension between continuity and discontinuity in our social existence. It is simultaneously the vessel of continuity containing the deep structures of the past (symbolized by the longevity of many urban buildings, roads, and other infrastructure) as well as the staging ground for m...

I have been involved with studies about global climate change since the early 1970s when I was working at the Institute for Environmental Studies at the University of Wisconsin-Madison on a project led by the late climatologist Reid Bryson.1 This large multidisciplinary group was attempting to model the impacts on world food production of changes i...

The most famous model of regional structure is the concentric ring model of von Thünen (1826) based on linear transportation costs, in a homogeneous plane, with a single urban market center. Subsequently this model was expanded by Christaller (1935) and Lösch (1940) to multiple market centers of different sizes and different commodities, while stil...

That populations of single species in simple environments may exhibit oscillatory patterns over time has been well understood since first being documented experimentally for sheep blowflies by Nicholson (1933) and by Elton (1942) for small mammals in boreal environments. In the latter case, the most famous example is the 4-year cycle of lemmings. K...

The possibility of extinguishing species by human action underlies the biggest fear of all, that the species we extinguish may be ourselves. To the extent that we are dependent on the biosphere, a major collapse of other species could be the trigger for our collapse, a forecast made by the most pessimistic of analysts (Meadows, Meadows, Randers, an...

Dynamic complexity is a part of a broader meta-complexity that encompasses many different definitions of complexity, with the list of 45 provided by Seth Lloyd (Horgan, 1997) being the basic starting point (Rosser, 2009a). Dynamic complexity can be seen as consisting of four categories: cybernetics, catastrophe, chaos, and interacting heterogeneous...

In the previous chapter we examined the problems of management of an open access fishery. We saw that a general outcome for this case was that fishery supply curves can easily bend backwards, opening the possibility of catastrophic collapses of such fisheries as demand increases. We considered a number of management issues related to this problem,...

In the previous chapter we presented a wide variety of models showing how interactions between agglomeration and long-distance trade influenced the historical development of cities. The presence of nonlinearities most clearly associated with increasing returns of one sort or another lay at the foundation of the discontinuous bifurcations underlying...

The connection between economics and ecology1 runs much deeper than the identical first two syllables of their respective names. Theories of evolution for each have directly and indirectly influenced each other for a long time in a symbiotic pattern. Both fields have shared a division between those theories of evolution emphasizing a gradualist con...

Historically there has been considerable unity of method in modelling the regional distribution of population and economic activities and the intraurban distribution of these. The most obvious example is that the standard neoclassical Mills–Muth model (Alonso, 1964; Mills, 1967; Muth, 1969) of intraurban land use and rent is essentially similar to...

In the previous chapter, our discussion of evolution focused on the matter of continuous versus discontinuous perspectives on evolution. Darwin was cast into the role of the defender and expositor of the continuous view. This would appear to put Darwin into a camp that would not view evolution as a dynamically complex process. Certainly, discontinu...

In this short survey chapter the historical roots of complexity issues in regional and urban economics are traced; from Forrester's industrial dynamics, over cybernetics, synergetics, and catastrophe, to bifurcation and chaos perspectives. It is noted that in the current US dominated literature European pioneering work, even when written in English...

This paper considers the implications of complex ecologiceconomic dynamics for three broad, Post Keynesian perspectives: the uncertainty perspective, the macrodynamics perspective and the Sraffian perspective. Catastrophic, chaotic and other complex dynamics will be seen as reinforcing the conceptual foundations of Keynesian uncertainty. Predatorpr...

Drawing on the middle chapters from the first edition of J. Barkley Rosser's seminal work, From Catastrophe to Chaos, this book presents an unusual perspective on economics and economic analysis. Current economic theory largely depends upon assuming that the world is fundamentally continuous. However, an increasing amount of economic research has b...

Roger Koppl (2009, p. 1) argues that “Austrian economics is a school of thought within the broader complexity movement in economics.” Is he correct? Although there are many who have argued for some overlapping between the two, I shall argue that this is probably an overly strong statement. The main reason is that there are substantial elements and...

Daily returns of stock markets in emerging markets in Asia, Africa, South America, and Eastern Europe from the early 1990s through 2006 are analyzed for the possible presence of nonlinear speculative bubbles. The absence of these is tested for by studying residuals of vector autoregressive-based fundamentals, using the Hamilton regimeswitching mode...

Marshall's problem regarding the relationship between economics and physics and biology is considered within the context of the possibility of a transdisciplinary approach that would truly combine the various disciplines. While a combined econophysics is very much an ongoing enterprise, and a possible econobiology may be emerging along several diff...

As Europe moves toward an integrated academic system, European economics is changing. This book discusses that change, along with the changes that are happening simultaneously within the economic profession. The authors argue that modern economics can no longer usefully be described as 'neoclassical', but is much better described as complexity econ...

In the paper "Conversation or Monologue: On Advising Heterodox Economists," we are taken to task by Matías Vernengo on a number of issues made in Colander, Holt, and Rosser (2004b; 2007-8). In this paper, we respond to two central arguments made by Vernengo, and stand by our earlier arguments that (1) heterodox economists hurt themselves by self-l...

We investigate how stochastic asset price dynamics with herding and financial constraints explains the presence of a period of financial distress (PFD) following the peak and preceding the crash of a bubble [Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crisis, 4th ed. (New York: Wiley, 2000, Appendix B)] as common am...

It is a pleasure to present to our readers this special issue on Issues in the Methodology of Experimental Economics. While there are no headings to delineate them, this issue consists of three sections. The first consists of a target article by Vernon Smith that is based on a talk given by him at a conference of the Economic Science Association, “...

As Europe moves toward an integrated academic system, European economics is changing. This book discusses that change, along with the changes that are happening simultaneously within the economic profession. The authors argue that modern economics can no longer usefully be described as 'neoclassical', but is much better described as complexity econ...

In this paper we analyze a credit economy � la Kiyotaki and Moore [1997. Credit cycles. Journal of Political Economy 105, 211-248] enriched with learning dynamics, where both borrowers and lenders need to form expectations about the future price of the collateral. We find that under homogeneous learning, the MSV REE for this economy is E-stable and...

Burczak (Socialism after Hayek, Ann Arbor: University of Michigan Press, 2006) presents a proposed form of stakeholder socialism to overcome the critique by Hayek of Marxist socialist systems. This involves financing the beginning of worker-owned and managed cooperatives through a wealth tax, with a generous social safety net, within a market econo...

We consider the precursors to the discovery of sensitive dependence on initial conditions by Edward Lorenz (1963) in his model of climatic fluid dynamics. This will focus on work in various disciplines that imply either such sensitivity, irregular endogenous dynamic patterns, or fractal nature of an attractor, as is also found in the attractor unde...

This Colloquium reviews statistical models for money, wealth, and income distributions developed in the econophysics literature since the late 1990s. By analogy with the Boltzmann-Gibbs distribution of energy in physics, it is shown that the probability distribution of money is exponential for certain classes of models with interacting economic age...

A new traditional economy combines elements of traditional culture, such as Confucianism, with a modern, technologically advanced economy, while a new institutional economy minimizes transactions costs through its institutional structure. South Korea has enhanced its competitive edge by drawing on Confucian elements such as respect for education an...

'Complexity theory, complexity science, a general theory of complex systems: these subjects are the height of fashion and for good reason and so a book with this title is very welcome. . . a valuable book, particularly because the chapter-by-chapter bibliographies are a major resource. . . the strength of the book lies in its historical reviews and...

This paper discusses the debate between those advocating a computational and those advocating a dynamic definition of complexity, and how this relates to issues in econophysics. It then reviews the criticisms that have been raised about ways in which econophysics has been done, noting that many of these are now being dealt with. Finally, it argues...

Research in econophysics has been going on for more than a decade with considerable publicity in some of the leading general science journals. Strong claims have been made by some advocates regarding its reputed superiority to economics, with arguments that in fact the teaching of microeconomics and macroeconomics as they are currently constituted...

We examine the "new comparative economics" as proposed by Djankov et al. (2003) and their use of the concept of an institutional possibilities frontier. While we agree with their general argument that one must consider a variety of institutions and their respective social costs, including legal systems and cultural characteristics, when comparing t...