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A complex systems approach to constructing better models for managing financial markets and the economy
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  • Regular Article
  • Open Access
  • Published: 05 December 2012

A complex systems approach to constructing better models for managing financial markets and the economy

  • J. Doyne Farmer1,
  • M. Gallegati2,
  • C. Hommes3,
  • A. Kirman4,
  • P. Ormerod5,9,
  • S. Cincotti6,
  • A. Sanchez7 &
  • …
  • D. Helbing8 

The European Physical Journal Special Topics volume 214, pages 295–324 (2012)Cite this article

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Abstract

We outline a vision for an ambitious program to understand the economy and financial markets as a complex evolving system of coupled networks of interacting agents. This is a completely different vision from that currently used in most economic models. This view implies new challenges and opportunities for policy and managing economic crises. The dynamics of such models inherently involve sudden and sometimes dramatic changes of state. Further, the tools and approaches we use emphasize the analysis of crises rather than of calm periods. In this they respond directly to the calls of Governors Bernanke and Trichet for new approaches to macroeconomic modelling.

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Authors and Affiliations

  1. Santa Fe Institute, 1399 Hyde Park Road, Santa Fe, NM, 87501, USA

    J. Doyne Farmer

  2. DiSES, Universit Politecnica delle Marche, Ancona, Italy

    M. Gallegati

  3. CeNDEF, University of Amsterdam, Amsterdam, The Netherlands

    C. Hommes

  4. GREQAM, Aix Marseille Université, EHESS, Marseille, France

    A. Kirman

  5. GREQAM, Volterra Partners, London, UK

    P. Ormerod

  6. DIME-DOGE.I, University of Genoa, Genoa, Italy

    S. Cincotti

  7. GISC, Universidad Carlos III de Madrid, Madrid, Spain

    A. Sanchez

  8. ETH, Zürich, Switzerland

    D. Helbing

  9. University of Durham, Durham, UK

    P. Ormerod

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Open Access This article is distributed under the terms of the Creative Commons Attribution 2.0 International License (https://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Farmer, J.D., Gallegati, M., Hommes, C. et al. A complex systems approach to constructing better models for managing financial markets and the economy. Eur. Phys. J. Spec. Top. 214, 295–324 (2012). https://doi.org/10.1140/epjst/e2012-01696-9

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  • Received: 01 August 2012

  • Revised: 09 October 2012

  • Published: 05 December 2012

  • Issue Date: November 2012

  • DOI: https://doi.org/10.1140/epjst/e2012-01696-9

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Keywords

  • European Physical Journal Special Topic
  • Housing Market
  • Rational Expectation
  • Complex World
  • Dynamic Stochastic General Equilibrium
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