J Doyne Farmer, a leader in complexity and chaos theory, has written a very readable book on complexity theory for the average reader. Making Sense of Chaos: A better economics for a better world takes the reader through the basics for why complexity modeling is necessary and different from classic economic theory. Farmer then walks through how complexity theory can be used to explain different economic phenomena.
Complexity theory and simulations can be used to explain the financial crashes we have seen. It can help explain the housing bubble, and it has applications for providing deeper understanding of market efficiency. It has also been useful for explaining the issues of credit crises associated with leverage.
Farmer provides good explanations for how complexity theory can be employed to predict weather and climate change as well as technical progress. He does a great job of taking a difficult topic and make it approachable by others, but the modeling of a complex system is not easy and requires a lot of simulation work where the results are not always expected. Simple changes in assumptions will give very different results. Nevertheless, it is important to think about many economic problems as complex systems that do not have the same features as an equilibrium model.
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