Santa Fe Institute
History
Will Freudenheim | William Morgan | Darren Zhu:
"Enter the Santa Fe Institute (SFI); founded in 1984 as a kind of metascientific school for breaching the disciplinary boundaries of the academy, SFI gathered together the insights of cybernetics, systems theory and computer science under the umbrella header of “the complexity sciences.” In 1995, Doyne Farmer, external professor at SFI since 1986, published the seminal SFI working paper, “Market Force, Ecology, and Evolution.” Therein, Farmer argued for a nonequilibirum price formation rule and a capital allocation model that was equivalent to standard models in population biology. For Farmer and other key SFI thinkers, namely the economist W. Brian Arthur, Herbert Simon’s concept of bounded rationality played a critical role in dismantling the neoclassical assumptions about agents, optimization and price and in forwarding the broad critique that neoclassical economic theory incorrectly assumes a homo economicus model of human behavior. Per Simon, accounts of behavior must include information processing costs, knowledge imperfections, firm and individual irrationality and the ineradicable persistence of novelty and surprise that transform economies from within and without on account of interdependencies and feedback mechanisms.
Given its interests in theorizing complex and nonlinear systems which demonstrate the capacity for spontaneous and adaptive self-organization, it is little surprise that SFI has spearheaded the ongoing revival of Hayekian thought in economics, and also disciplines far beyond. Following Hayek’s “The Use of Knowledge in Society” and The Sensory Order especially, SFI scholars have argued against a physics-based apprehension of the economy, which applies a mechanistic and deterministic framework, arguing instead for a biological framework that is process-dependent and evolutionary.
In 1995, the evolutionary biologists John Maynard Smith (who pioneered the use of mathematics in biology) and Eors Szathmary published the seminal book, The Major Transitions in Evolution, in which they showed how in the evolution of life there have been major transitions in which forms of cooperation emerged leading to higher levels of organization. This thesis, which connected eukaryotes to multicellular organisms to human sociocultural evolution, made it possible to draw a direct line between the evolution of life and evolution in economics. Perhaps unsurprisingly, Maynard Smith was himself personally interested in and visited SFI more than once, at times writing excitedly and others irritatedly about the work being done there."