Inspired by empirical studies of networked systems such as the Internet, social networks, and biological networks, researchers have in recent years developed a variety of techniques and models to help us understand or predict the behavior of these systems. Here we review developments in this field, including such concepts as the small-world effect, degree distributions, clustering, network correlations, random graph models, models of network growth and preferential attachment, and dynamical processes taking place on networks.

We propose a theory of asset pricing based on heterogeneous agents who continually adapt their expectations to the market that these expectations aggregatively create. And we explore the implications of this theory computationally using our Santa Fe artificial stock market. Asset markets, we argue, have a recursive nature in that agents ’ expectations are formed on the basis of their anticipations of other agents ’ expectations, which precludes expectations being formed by deductive means. Instead traders continually hypothesize—continually explore—expectational models, buy or sell on the basis of those that perform best, and confirm or discard these according to their performance. Thus individual beliefs or expectations become endogenous to the market, and constantly compete within an ecology of others ’ beliefs or expectations. The ecology of beliefs co-evolves over time. Computer experiments with this endogenous-expectations market explain one of the more striking puzzles in finance: that market traders often believe in such concepts as technical trading, “market psychology, ” and bandwagon effects, while academic theorists believe in market efficiency and a lack of speculative opportunities. Both views, we show, are correct, but within different regimes. Within a regime where investors explore alternative expectational models at a low rate, the market settles into the rational-

review. Views or opinions expressed herein do not necessarily represent those of the Institute, its National Member Organizations, or other organizations supporting the work. IIASA STUDIES IN ADAPTIVE DYNAMICS NO. 27 The Adaptive Dynamics Network at IIASA fosters the development of new mathematical and conceptual techniques for understanding the evolution of complex adaptive systems. Focusing on these long-term implications of adaptive processes in systems of limited growth, the Adaptive Dynamics Network brings together scientists and institutions from around the world with IIASA acting as the central node. Scientific progress within the network

For Artificial Life applications it is useful to extend Genetic Algorithms from a finite search space with fixed-length genotypes to open-ended evolution with variable-length genotypes. A new theoretical analysis is required, as Holland's Schema Theorem only applies to fixed lengths. It will be argued, using concepts of epistasis and fitness landscapes drawn from theoretical biology, that in the long run a population must havegenotypes of nearly equal length, and this length can only increase slowly. As the length increases, the population will be nearly converged, and hence evolving as a species.

Random graph theory is used to model relationships between sequences and secondary structures of RNA molecules. Sequences folding into identical structures form neutral networks which percolate sequence space if the fraction of neutral nearest neighbors exceeds a threshold value. The networks of any two different structures almost touch each other, and sequences folding into almost all "common" structures can be found in a small ball of an arbitrary location in sequence space. The results from random graph theory are compared with data obtained by folding large samples of RNA sequences. Differences are explained in terms of RNA molecular structures. 1.

that allows to choose the direction for the next step at random from all directions along which fitness does not decrease. Stationary states of populations correspond to local optima of the fitness landscape. Evolution is seen as a series of transitions between optima with increasing fitness values. Wright's metaphor saw a recent revival when sufficiently simple models of fitness landscapes became available [1, 41]. These models are based on spin glass theory [63, 66] or closely related to it like Kauffman's Nk model [42]. Evolution of RNA molecules has been studied by more realistic models that deal explicitly with molecular structures obtained from folding RNA sequences [23, 24]. Fitness values serving as input parameters for evolutionary dynamics were derived through evaluation of the structures. The complexity of RNA fitness landscapes originates from conflicting consequences of structural changes that are reminiscent of "frustration" in the theory of spin glasses [2]. Fitness in t

We introduce a new model of evolution on a fitness landscape possessing a tunable degree of neutrality. The model allows us to study the general properties of molecular species undergoing neutral evolution. We find that a number of phenomena seen in RNA sequence-structure maps are present also in our general model. Examples are the occurrence of “common ” structures which occupy a fraction of the genotype space which tends to unity as the length of the genotype increases, and the formation of percolating neutral networks which cover the genotype space in such a way that a member of such a network can be found within a small radius of any point in the space. We also describe a number of new phenomena which appear to be general properties of neutrally evolving systems. In particular, we show that the maximum fitness attained during the adaptive walk of a population evolving on such a fitness landscape increases with increasing degree of neutrality, and is directly related to the fitness of the most fit percolating network. 1

The evolution of RNA molecules in replication assays, viroids and RNA viruses can be viewed as an adaptation process on a 'fitness' landscape. The dynamics of evolution is hence tightly linked to the structure of the underlying landscape. Global features of landscapes can be described by statistical measures like number of optima, lengths of walks, and correlation functions. The evolution of a quasispecies on such landscapes exhibits three dynamical regimes depending on the replication fidelity: Above the "localization threshold" the population is centered around a (local) optimum. Between localization and "dispersion threshold" the population is still centered around a consensus sequence, which, however, changes in time. For very large mutation rates the population spreads in sequence space like a gas. The critical mutation rates separating the three domains depend strongly on characteristics properties of the fitness landscapes. Statistical characteristics of RNA landscapes are acces...

Richard Alexander has argued that moral systems derive from indirect reciprocity. We analyse a simple case of a model of indirect reciprocity based on image scoring. Discriminators provide help to those individuals who have provided help. Even if the help is never returned by the beneficiary, or by individuals who in turn have been helped by the beneficiary, discriminating altruism can be resistant against invasion by defectors. Indiscriminate altruists can invade by random drift, however, setting up a complex dynamical system. In certain situations, defectors can invade only if their invasion attempts are sufficiently rare. We also consider a model with incomplete information and obtain conditions for the stability of altruism which differ from Hamilton’s rule by simply replacing relatedness with acquaintanceship.

We view the folding of RNA-sequences as a map that assigns a pattern of base pairings to each sequence, known as secondary structure. These preimages can be constructed as random graphs (i.e. the neutral networks associated to the structure s). By interpreting the secondary structure as biological information we can formulate the so called Error Threshold of Shapes as an extension of Eigen's et al. concept of an error threshold in the single peak landscape [5]. Analogue to the approach of Derrida & Peliti [3] for a flat landscape we investigate the spatial distribution of the population on the neutral network. On the one hand this model of a single shape landscape allows the derivation of analytical results, on the other hand the concept gives rise to study various scenarios by means of simulations, e.g. the interaction of two different networks [29]. It turns out that the intersection of two sets of compatible sequences (with respect to the pair of secondary structures) plays a key role in the search for "fitter" secondary structures.