Visualizing the Invisible Hand of Markets: Simulating Complex Dynamic Economic Interactions

Summary In complex systems, many different parts interact in nonobvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyse it with the tools available. To get a better insight of phenomena that emerge from complex interactions, we need instruments that can analyse simultaneously complex interactions between many parts. Here, a simulator modelling different types of economies is used to visualize complex quantitative aspects that affect economic dynamics. The main conclusions are: (1) relatively simple economic settings produce complex nonlinear dynamics and, therefore, linear regressions are often unsuitable to capture complex economic dynamics; (2) flexible pricing of goods by individual agents according to their microenvironment increases the health and wealth of the society, but asymmetries in price sensitivity between buyers and sellers increase price inflation; (3) prices for goods conferring risky long‐term benefits are not tracked efficiently by simple market forces; (4) division of labour creates synergies that improve enormously the health and wealth of the society by increasing the efficiency of economic activity; (5) stochastic modelling improves our understanding of real economies, and didactic games based on them might help policy‐makers and nonspecialists in grasping the complex dynamics underlying even simple economic settings. Copyright © 2015 John Wiley & Sons, Ltd.