Complexity research in economics: past, present and future

In this paper, we provide a brief overview of the field of complexityresearch in economics, and discuss directions of research that weconsider to be promising in terms of solving open issues. We start thesurvey of the field with the research that emerged in the 1990s, whenunder the influence of earlier developments in the natural sciences(e.g., thermodynamics and chaos theory), the term complexity became infashion to refer to theoretical ideas about how "ordered" patterns at anaggregate level can emerge from interaction between heterogenous agentsat the microeconomic level. This gave rise to the notion ofself-organization in dissipative systems, or "order at the edge ofchaos" to describe economic dynamics. Because disequilibrium plays alarge role in these theories, these ideas worked very well incombination with a Schumpeterian view of the economy, which alsostresses disequilibrium. In the current literature, economic complexity is mainly used to referto the application of quantitative methods based on networks that can becreated on the basis of very fine-grained data on production or trade.These data are used to produce aggregate measures of development, aswell as to describe how production structures may evolve over time. Thisliterature developed largely disconnected to the earlier complexityliterature. The new economic complexity paradigm is largely void ofeconomic theory, and instead aims to provide a set of data reductiontechniques that are used to characterize development. With regard to outlook for complexity research in (Schumpeterian)economics, on the one hand, we feel that the potential for analyzing theeconomy as a dissipative, out-of-equilibrium system has not been fullyexploited yet. In particular, we propose that - in line with the fieldof "Big History" (which aims to describe and analyze a coarse history ofthe universe since the Big Bang) - there is work to be done on thelarger issues in economics, in particular climate change andsustainability