How can it be that we aren’t better able to predict financial crises, and possibly even prevent them?

This is the problem mathematician J. Doyne Farmer is trying to solve, with a blossoming branch of maths known as complexity economics. The Oxford University Mathematical Institute professor (and external professor at the Santa Fe Institute) is Director of the Complexity Economics Programme at the Oxford Martin School’s Institute for New Economic Thinking, and described his work this month to an Oxford lecture theatre packed with mathematicians and economists.

Complex systems is a mathematical approach rooted in insights from the physical and natural sciences. Most equations are non-linear; they’re complex. Computerisation increasingly allows mathematicians to simulate models of such complex dynamics. By applying complex systems to economics, Farmer thinks we might find intriguing new ways to predict and mitigate what he calls ‘our collective effect on ourselves’, for example, the complicated situations that create financial downturns…img_0065