## Dealing with the Complexity of Economic Calculations (1997)

Citations: | 7 - 1 self |

### BibTeX

@TECHREPORT{Rust97dealingwith,

author = {John Rust},

title = {Dealing with the Complexity of Economic Calculations},

institution = {},

year = {1997}

}

### Years of Citing Articles

### OpenURL

### Abstract

This essay is a response to a growing negative literature that suggests that neoclassical economic theories based on hypotheses of rationality and equilibrium are of limited practical relevance because they require an infeasibly large number of calculations. Many of the negative results are translations of abstract complexity bounds from the computer science literature. I show that these bounds do do not constitute proofs that difficult economic calculations are "impossible" and discuss the type of hardware and software that can make it possible to solve very hard problems. I discuss four different ways to break the curse of dimensionality of economic problems: 1) by exploiting special structure, 2) by decomposition, 3) by randomization, and 4) by taking advantage of "knowledge capital." However these four methods may not be enough. I offer some speculations on the role of decentralization for harnessing the power of massively parallel processors. I conjecture that decentralization i...