Book contents
- Frontmatter
- Contents
- Figures
- Tables
- Preface
- Acknowledgements
- Part I The State of Knowledge and its use in Environmental Economics
- Part II A Positive Theory for Complexity Economics
- 5 Concepts of Complexity for Economics
- 6 Fundamental Uncertainty
- 7 Micro-foundations for Consumer Theory
- 8 Micro-foundations for an Economic Theory of Innovation
- 9 Empirical Foundations for the Nature of Money
- 10 Micro-foundations for Credit Creation and the Business Cycle
- 11 A Macroeconomic Model for Growth and Creative Destruction
- Part III Applied Complexity Economics for Environmental Governance
- References
- Index
6 - Fundamental Uncertainty
from Part II - A Positive Theory for Complexity Economics
Published online by Cambridge University Press: 03 November 2022
- Frontmatter
- Contents
- Figures
- Tables
- Preface
- Acknowledgements
- Part I The State of Knowledge and its use in Environmental Economics
- Part II A Positive Theory for Complexity Economics
- 5 Concepts of Complexity for Economics
- 6 Fundamental Uncertainty
- 7 Micro-foundations for Consumer Theory
- 8 Micro-foundations for an Economic Theory of Innovation
- 9 Empirical Foundations for the Nature of Money
- 10 Micro-foundations for Credit Creation and the Business Cycle
- 11 A Macroeconomic Model for Growth and Creative Destruction
- Part III Applied Complexity Economics for Environmental Governance
- References
- Index
Summary
This chapter introduces the concepts and implications of uncertainty in complex economic models. Uncertainty is driven by different levels of analysis: from the concept of the agent and how he makes decisions (behavioural economics), from the aggregation of interacting agents that leads to emergent outcomes and heavy-tailed statistics (complexity science) and from the non-ergodicity and strong path-dependence of evolutionary models. These sources are analysed and explained, which generates a foundational definition for fundamental uncertainty and a narrative for how to use information generated by complex models attempting to mimic an infinitely more complex reality.
- Type
- Chapter
- Information
- Complexity Economics for Environmental Governance , pp. 132 - 156Publisher: Cambridge University PressPrint publication year: 2022