A Complex Adaptive System

A Complex adaptive system

Complexity theory has appeared in order to complement the theory that scientists viewed the world as a liner place and apply cause and effect to all phenomena because the theory failed to explain various ecosystems or immune system or physics. Complexity theory comprise relationships, interaction, emergence, patterns and repetition (Yu, 2001). The theory views the universe as the incorporation of complex systems such as immune system, weather system and social system and these systems are adaptive into their changing environment, which is called a complex adaptive system (CAS). The attributes of CAS include emergence that the system interacts randomly without a plan, co-evolution that they adapt themselves into the changing environment, sub optimal that the system does not need to be optimal for adapting to new environments, variety in systems, connectivity that how the agents in the system are connected, repetition through feedback, a side of chaos that a complex adaptive system has chaos, and nested systems that most systems have smaller systems.

Economic systems display the features of complex adaptive systems due to the effect of economic variables such as foreign exchange rates and stock market prices, breaking down the equilibrium. Therefore, economic cycles are characterized by regular and irregular patterns and regime changing according to economic situations and recognized with the pattern, being foreseen for the future. Analysing stock markets and foreign exchange markets displays complex nature of economic time series. Such a nonlinear model of economic cycles exhibit intermittency that appears in order-chaos and shifting chaos-chaos (Bennet & Bennet, 2004). These economic features justify unstable and a chaotic economic structure and explain that it has a responsibility of economic intermittency.