Emergence, Levels, and Hierarchy

This chapter deals with the difficult topic of emergence. Complexity science is sometimes called the science of emergence, meaning that a system can have properties that are not found in its parts. The concepts of simple emergence, weak emergence, and strong emergence are introduced. While self-organization describes the formation of structure at one level of the system, emergence always requires at least two levels. Complex systems are often organized on multiple levels that form a hierarchy. Economics knows the micro level of agents and the macro level of the system, but it can be useful to think of additional levels such as a meso level. From a complexity perspective, the common practice in economics of working with representative agents, which eliminates the difference between levels, is a major fallacy of composition. The common practice of providing microfoundations to macroeconomics is contrasted with the idea of providing macrofoundations to microeconomics, which is related to the concept of downward causation. Institutions are an important instance of an emergent phenomenon with the capacity of downward causation. How institutions can emerge is shown with a formal model. As an alternative to mainstream macroeconomics, the chapter introduces emergent or agent-based macroeconomics.