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1 What is Complexity?
Since Herbert Simon's distinction between substantive and procedurally rationality [18], complexity in economics has (until recently) simply meant not assuming that an economic agent acted as if it had the computational resources to completely cope with the demand placed on it by its environment (for a survey of this area see [11]). In a sense this is intended as a negative definition to contrast with the usual simplifying assumptions of mainstream economics. The use of the word "complexity" here reflects the greater analytic difficulty which is caused by relaxing these assumptions. However, as generally used, this usage is vague - it does not necessarily distinguish between different kinds of limitations on the agent (memory, inference, ability to generalise, access to information, etc.) or different kinds of overloading caused by the environment. It also encourages the conflation of the complexity from the agent's point of view and from the modeller's view. Thus although it has performed a useful role in critique it is not a very helpful usage for more focused analytic discourse.
From Complexity to Agent Modelling and Back Again - Bruce Edmonds - 15 MAY 97
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