5 Challenges of Integrating Complexity and Evolution into Economics Robert Axtell, Alan Kirman, Iain D. Couzin, Daniel Fricke, Thorsten Hens, Michael E. Hochberg, John E. Mayfield, Peter Schuster, and Rajiv Sethi Abstract Complex systems theory and evolutionary theory hold important insight for economics, yet to date they have played a limited role in shaping modern economic theory. This chapter reviews different notions of equilibrium and explores four distinct areas rele- vant to the incorporation of evolutionary and complexity ideas into economics, finance, and policy. It investigates the determinants of major economic transitions, such as the Industrial Revolution or the collapse of the Soviet Union. It asks whether evolutionary processes should lead to an increase in complexity, on average, of economic and social systems over time. It reviews modern theories of group learning in biology, which have both evolutionary and complexity dimensions, to see if they might be relevant to human social institutions, such as firms. It analyzes whether the structure of human interactions or individual human intelligence is primarily responsible for the performance of our in- stitutions. Finally, it finds the methods of evolutionary analysis and of complex systems to be extremely useful in capturing the open-ended, evolving nature of an economy composed of interactive agents and suggests that these methods be used to create more realistic models of actual markets and economies. Introduction To a biologist trained in evolutionary thinking and cognizant of the kinds of far- reaching technological and institutional changes that occur in real economies, it might come as something of a surprise to learn that evolutionary notions play a relatively minor role in modern economic theorizing. An older tradition, largely due to Schumpeter (1934, 1942), argues for the importance of treat- ing economic growth as the result of technological innovation—performed by From “Complexity and Evolution: Toward a New Synthesis for Economics,” David S. Wilson and Alan Kirman, eds. 2016. Strüngmann Forum Reports, vol. 19, series ed. J. Lupp. Cambridge, MA: MIT Press. ISBN 978-0-262-03538-5.