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Complexity Economics An Introduction

Understanding our global economy as a complex system
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Created by Think Academy
Last updated 2/2016
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As advanced economies come to the end of the process of industrialization and with the rise of information technology we are witnessing the birth of a new type of post-industrial economy, it is built on services, fueled by information and knowledge and it is increasingly integrated through global financial and supply chain networks. These huge changes in the deep architecture to our economies go far beyond our industrial paradigm and are necessitating a re-imagination of economy theory. General equilibrium models that were derived from classical physics got mathematized during the 20th century, these models give us a picture of the economy as composed of isolated, purely rational individuals, optimizing over a well defined set of preferences out of which we get a macro level general equilibrium in a somewhat static and timeless economy.
It was a paradigm that fitted well with industrial age mechanization. But today the limitations of general equilibrium theory are becoming more apparent as we build new models, models to individual agents that have bounded rationality, driven by a diversity of motives they are interconnected and interdependent. And it is out of these nonlinear interactions we get the emergence of economic institutions as network structures that are far-from-equilibrium, in an economy that is constantly changing from internal drivers as it develops over time through an evolutionary process.


This course is an overview to the new area of complexity economics, the application of models from complexity theory to the domain of economic science. The course is broken down into five main sections, we will start off with an overview to economic theory discussing our standard approach before going on to give a clear outline to the main ideas coming out of complexity economies. Next we will borrow from behavioral economics to build up a more complex model to economic agents as we talk about the idea of bounded rationality, different theories of value, choice theory and incentive systems.
In the third section we will be looking at nonlinear economics as we apply system dynamics to modeling micro economic phenomena, we will be talking about how feedback loops create nonlinearity and the process of self-organization out of which emerges non-equilibrium patterns of organization in the economy. Next we will apply network analysis to modeling macro level economic institutions such as markets, we will introduce you to the basics of network theory and go on to talk about economic networks, their topology, distribution and dynamics. In the final section will be looking through the lens of complex adaptive systems theory to understand how whole macro economies emerge out of the actions and reactions of many different organizations, we will use the model of a fitness landscape in order to help us understand the process of economic evolution.

Who is the target audience?
  • This course is intended for a broad group of people but will be particularly relevant for those with a background in economics or busness management
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What Will I Learn?
The aim of this course is to give you a solid grasp of the core concepts within the domain of complexity economics
By the end of the course you should be familiar with and be able to apply the most important models from complexity economics
View Curriculum
  • There are no prerequisites to this course aside for a firm grasp of the english language and general knowledge of standard economic theory
Curriculum For This Course
Expand All 25 Lectures Collapse All 25 Lectures 05:33:32
11 Lectures 01:56:10

Brief overview to the content we will be covering during the course

Preview 03:54

In this video we give a quick overview to complexity theory, systems thinking and complex systems that will form the foundations to our discussion during the rest of the course.

Preview 06:42

In this video we will be firstly talking about what theories and paradigms are and providing a little insight to their basic workings before moving on to define this subject that we call economics. We will outline some of the major considerations involved in the study of economics, including trying to understand the logic behind the decision making of agents, theories of economic value, the dynamics of cooperation and competition, economic institutions and economic development

Economic Theory

In this video we will be giving an overview to the theory that supports standard economics and try to understand its basic workings. What we will be trying to do here is get an idea for why our traditional economic framework is the way it is, from this we should gain a greater appreciation for it and gain a better understanding for where some of its capabilities and limitations lie
Standard Economic Theory Part 1

In this video we will continue on with our discussion surrounding standard economic theory

Standard Economic Theory Part 2

In this module we will be talking about some of the major trends that are reshaping our global economy both on the macro level and the micro level. We have added this module to the course because these trends are taking us into a world of heightened connectivity, interdependency and in a word complexity, this is a world that in many ways goes beyond our traditional industrial age paradigm and necessitates a new more expanded theoretical framework for economic science
Context Part 1

In this video we will continue on with our discussion surrounding the current economic context as we talk about the information revoltuion

Context: Information Revolution

In this video we will continue on with our discussion surrounding the current economic context as we talk about


Context: Globalization

In this video we will continue on with our discussion surrounding the current economic context as we talk about


Context: Sustainability

In this video we give a brief overview to complexity economics, a modelling framework that sees the the economy as an open system, composed of heterogeneous agents with bounded rationality making choices within a particular context, which gives rise to networks of interactions that we call institutions and a macro level non-equilibrium to the economy that is in constant change driven by internal dynamics

Complexity Economics Part 1

In this video we continue on with our dicsuction on complexity theory

Complexity Economics Part 2
Behavioural Economics
4 Lectures 01:09:35

In this video we will be turning our attention to what insight and models complexity economics can offer us in trying to understand the basic building blocks of economics, people, aka agents. We will draw upon the new area of economics called behavioral economics to try and give some account of what people value, how people make choices and how they respond to incentives

Behavioural Economics

Value theory within economics represents all theories that try to define what economic value is, where it comes from, why goods and services are priced the way they are and how to calculate some form of objective price, if such a thing exists. In this video we will be looking at the two major paradigms to the theory of economic value, the standard extrinsic paradigm based around the idea of utility and the alternative nonlinear paradigm of intrinsic value

Value Theory

In this video we are going to be covering the topic of choice theory, as we look at two different models to how agents make choices within an economic context. During the video we will be discussing the standard model of rational choice theory, we will look at its basic assumptions grounded in the idea of perfect information. We will then go on to talk about what happens when these assumptions break down and look at the alternative models that are coming out of behavioral economics as it presents us with a new set of context dependent models for how agents make decisions within complex and uncertain environments
Choice Theory

Incentive Systems
Nonlinear Economics
4 Lectures 51:40
In this video we will be introducing you to the basics of system dynamics as we discuss causal link diagrams, we will try to show how causal link diagrams can be used in the modeling of many microeconomic phenomena that involve the interaction between agents, such as zero and positive sum games.
Causal Links

How complex systems like businesses and economies change over time is studied within the domain of system dynamics that came out of MIT during the 50’s and 60’s. Central to this area is the idea of feedback loops which we will be exploring in this video as we talk about positive and negative feedback, virtuous and vicious cycles, we will touch upon the subject of control systems and finally causal loop diagrams
Feedback Loops

In this video we will be taking a brief look at the process of self-organization as it applies to economics, we will firstly talk about how in contrast to hierarchical structures which are static, self-organization is a dynamic process through which patterns of organization emerge out of local level nonlinear interactions, we go on to talk about a number of stages and prerequisites to this process

In this module we will be talking about the concepts of equilibrium and non-equilibrium, in continuing on with our discussion around feedback loops we will see how equilibrium is derived from negative feedback and randomness, but as soon as we get positive feedback within the system this will give us nonlinear dynamics and dis-equilibrium, as we get the emergence of new and distinct patterns of organization on the macro scale, during our discussion you will be introduced to a number of new concepts within complexity theory, such as symmetry breaking, phase transitions, tipping points and path-dependency.
Network Economics
3 Lectures 43:07
In this video we will be looking at the basics of network theory as applied to economics, talking about how connectivity is a very fundamental feature to a system and once we reach a certain critical level of connectivity things get flipped around and the focus becomes the structure and nature of these network of connections
Network Theory

In this video we will be taking a look at network topology and how it relates to economic systems, we firstly talk about the process of unbundling, where heightened connectivity disintegrates homogeneous formal organizations as they become distributed out and re-coordinated through networks. We will talk about clustering as a key factor in overall network topology and how it gives rise to network heterogeneity, distinct subsystems within the network that will likely maintain it out of equilibrium. We finally touch on the subject of how network analysis is an important tool for understanding and modeling informal economies
Network Topology

In this module we will been talking about economic network dynamics that looks at how networks are formed and develop over their life cycle. We will discuss how with network economies connections can grow at an super-linear rate giving rise to a nonlinear pattern of development, that requires a certain threshold to be overcome before the positive feedback loop of the network effect takes hold as the system can grow very rapidly
Network Dynamics
Complex Adaptive Systems
3 Lectures 53:00

In this video we will be looking through the lens of complex adaptive systems theory in order to try and interpret the macro dynamics within an economic system, we will firstly introduce you to the idea of a complex adaptive system before going on to build up a model to their dynamics through what is called a fitness landscape, a three dimensional state space for representing the whole system’s macro topology, we will talk about how this topology changes depending on the complexity of the environment and some of the strategies that agents use within these different environments

Complex Adaptive Systems

In this video we will be trying to identify some of the key factors involved in the resiliency of an economic or financial network as we talk about two very different strategies that can be taken when it comes to dealing with change effectively

In this module we will be covering the topic of evolutionary economics, a paradigm in economic development that interprets the growth of economies through the model of evolution. We will be firstly talking about our traditional approach to economic development before going on to give an outline to this process of evolution as it acts on economies through the production of variety, adaptation and selection, finally we will discuss how this gives rise to economic systems of greater differentiation and integration as they develop over time
About the Instructor
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eLearning for systems thinking

Think Academy is an e-Learning site dedicated to the area of systems thinking and complexity theory, our mission is to take the world of complexity and make it accessible to all. Systems and complex can be intimidating subjects with many sophisticated concepts, this is why we believe it is important to always start with the most essential, simplest elements of a subject making sure that students come away with a solid understanding of the core concepts behind each area. As Einstein said "Make everything as simple as possible, but not simpler"

Courses are curated and presented by Joss Colchester. Joss has extensive experience within the domain of complex systems both within academic research(mathematical modeling of complex system + network analysis) and has many years practical systems engineering experience(designing and developing complex web based information systems). He has a passion for taking abstract and complex concepts and making them concrete and accessible to as broad an audience as possible by combining clear and effective graphics with well structured course content.

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