In the early 2000s, concerns about the US housing market began to surface among economists at the Federal Reserve Bank of New York. They predicted that house prices could fall by up to 20%, but their model did not accurately predict the severity of the resulting economic downturn.
Now, J. Doyne Farmer is challenging traditional economic approaches with his new book, Making Sense of Chaos. In this book, he introduces a revolutionary concept called complexity economics, which treats economies as complex systems similar to natural ecosystems or Earth’s climate. By using giant computer simulations based on these ideas, Farmer believes that a more accurate representation of how billions of people interact within the global economy can be achieved.
Farmer’s path into economics has been unconventional. He dropped out of graduate school and built the world’s first wearable computer before applying it to beat casinos at roulette in the 1980s and founding Prediction Company in the 1990s, where he applied similar principles to the stock market. As a pioneer of chaos theory and complex systems, Farmer believes that complexity economics is finally emerging as a reliable method for making predictions about the economy.
