The New Field of Complexity

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Another area where computerized worlds seem to mimic the real one is economics. J. Doyne Farmer, a physicist formerly at Los Alamos National Laboratory, has been struck by how the mathematics of complexity seems to explain the workings of the stock market, which, like a biological system, involves constant adaptation to change by individual participants. After playing with computer models, Farmer decided it was time for a reality test of the theory. He and several partners founded Prediction Co., an Albuquerque, New Mexico, investment firm that uses math to try to beat the financial markets. Says Farmer: "If I can be right 55% of the time, that's enough to make plenty of money." In dry runs the company has done even better. Armed with an undisclosed amount of venture capital, Prediction Co. has begun trading for real.

Even if Farmer gets rich, there will be skeptics who dismiss the idea that complexity is the scientific revolution its proponents claim. The critics, writes physicist and sometime Santa Fe Institute visitor Daniel Stein in the December issue of Physics Today, can rightly ask, "Why is it necessary to force ((these phenomena)) under a single umbrella?" Yet there can be no doubt that investigations of complexity and chaos have at least made things more interesting. Comments Rockefeller University physicist Mitchell Feigenbaum: "Now we see things we didn't notice before, and we ask questions we didn't know how to ask. And whenever we can think of new questions, we can do good science."