CS History: Economics
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Markets Economic systems as described by Adam Smith's "invisible hand" as a concept of self-organizing system: "...every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good." An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
This concept of market competition was also discussed in The Road to Serfdom by Friedrich A. Hayek who emphasizes the importance of complexity and the limits of individual capabilities in the context of collective action : "Far from being appropriate only to comparatively simple conditions, it is the very complexity of the division of labor under modern conditions which makes competition the only method by which such coordination can be adequately brought about. There would be no difficulty about efficient control or planning were conditions so simple that a single person or board could effectively survey all the relevant facts. It is only as the factors which have to be taken into account become so numerous that it is impossible to gain a synoptic view of them that decentralization becomes imperative. But, once decentralization is necessary, the problem of co-ordination arises---a co-ordination which leaves the separate agencies free to adjust their activities to the facts which only they can know and yet brings about a mutual adjustment of their respective plans....This is precisely what the price system does under competition, and what no other system even promisses to accomplish."
Game Theory [1] Game theory was first developed in the 1920’s by John Von Neumann, as the formalization of his realization that economics is the outcome of the interaction of competing agents which behave according to certain universal rules, or, more generally, the behaviors between agents that react to what other agents do. Thus it offers a mathematical structure to describe various forms of competitive behaviors which are present in many complex systems. This framework allowed further developments of game theory (Nash equilibrium, or the emergence of cooperative behavior with the prisoner’s dilemma or its multiplayer form Tragedy of the Commons) which had important implications in social sciences and biology, as it can explain the emergence of the diversity of behaviors within a group (aggression, cooperation…), from simple interaction rules.
Nearly decomposable systems Herbert Simon
