Making Sense of Chaos - Doyne Farmer *****

This is a remarkable book, pulling together two key threads - chaos theory and economics. Doyne Farmer has a reputation as someone who breaks the mould: famously, he dropped out of studying physics at graduate level, working with a handful of others to put together a wearable computer (back in the 70s, when such a thing would have seemed pretty much impossible) to enable them to successfully beat the odds at casinos, picking up on the slight biases in roulette wheels.

Now, he presents a powerful case for applying chaos theory to economics, modelling economies in a totally different, agent-driven way rather than the traditional approach taken by economists. This combines for me the impact of two books I've read and greatly admired, but in both cases had felt that there needed to be a next step. The first of these was Chaos by James Gleick, which got me all fired up about chaos theory, but proved a bit of a let down as it was great to explain why, for example, it's difficult to predict the weather, but didn't give much of an idea of how to practically apply chaos theory.

Then there was Economyths by David Orrell, which demonstrates powerfully why traditional economics is so inconsistent from expert to expert and non-scientific - how, after all could a true science keep giving Nobel-ish prizes to totally incompatible theories? Economists seemed to be using the methods and mathematics of science rather in the fashion of a cargo cult, and Orrell exposes this beautifully... but doesn't give too much help on how to fix things. Farmer sets out to do just that with a ground-level reform.

I'm not qualified to say whether or not Farmer's ideas will truly deliver - but surely it is time for such a total overhaul of economics, and this could be the starting point. As a result this is an important, and fascinating book. It is, to be honest, quite heavy going - except when telling stories like the casino attempts, Farmer isn't great at making his topic accessible to a non-technical audience. Yet despite this, it is hard not to be impressed by the totally different take on economics, and the already demonstrated success with some limited modelling already.

Almost without doubt, most economists are going to hate this book - but history may well show that Farmer was on the side of the angels.

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