New book: An Introduction to Ergodicity Economics
A new textbook by SFI External Professor Ole Peters and Alexander Adamou re-examines core assumptions in economic theory. It presents a formal challenge to expected-value thinking and shows how non-ergodicity can arise naturally in economic models.
For those of you who couldn't make it to the launch event in June, here's a video about the "why" behind writing the textbook.
The story that orthodox economics is as good as a formal theory of human behavior can ever be has been holding economic theory back for a long time.
I know one formal theory that’s better than the orthodoxy.
Is there an age limit to apply?
We don't use the term "capital" but maybe this excerpt helps, from royalsocietypublishing.org/doi/full/10....
Our views on the role of models, meaning axioms or assumptions, are laid out on p.59 of the book.
ergodicityeconomics.com/an-introduct...
This book has been such a delight!
By my friend and mentor Reuben Hersh, about his friend and mentor Peter Lax. Reading it feels like listening to Reuben speak about his love of mathematics and his respect, friendship, and admiration for Peter.
That’s true, it’s not exactly the Ising model. Closer to a lattice gas, which can be mapped to a spin-1 Ising model…
Upshot: statistical mechanicians studied variants of these systems, around the time when Schelling proposed his model.
I was listening to your podcast, @seanmcarroll.bsky.social and @pettertornberg.com. I always thought of the Schelling model as some sort of "zero-temperature Ising thing." But this time I asked chatGPT, and the exact mapping is worked out here:
journals.aps.org/pre/abstract...
Interesting for you?
I was also just thinking about ontology -- the study of being and existence -- in the context of economics.
Curiously, a number of the topics on your list are chapters in the EE textbook. Plenty of overlap.
It makes me exceedingly happy that there are people all around the world who enjoy this kind of gentle slow meditation. Social-media scatter brain be damned.
And if one of them is Dave Bacon, you know it's good stuff!
That's rather lovely in a non-trivial way!
At the launch party last week, we also had a big book for big ideas.
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And, of course, have a look at our textbook, where we develop Ergodicity Economics, from the ground up. A fully functioning formal alternative to orthodox economic theory.
ergodicityeconomics.com/publications/
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If you find this as interesting as I do, come along next week to listen to one of the authors, Duncan James, present the book and recent updates, in our EE seminar series:
ergodicityeconomics.com/event/semina...
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That was established in an admirable effort by 4 economists, experts in expected-utility theory, who reviewed 8 decades of empirical work, concluding:
"The power to predict out-of-sample is in the poor to non-existent range."
See "Risky Curves"
routledge.com/Risky-Curves...
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What does that mean?
I would say it means that this core concept of orthodox economics -- utility -- is meaningless and misleading.
But don't take my word for it - this is known: empirically, expected-utility theory and its descendants, like prospect theory etc., don't work.
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I've written a blog post about this with Ollie Hulme, where we spell out the mathematics and give you an interactive app.
Try it out for yourself. Maximizing expected utility destroys actual utility.
ergodicityeconomics.com/2025/05/28/exp
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How can I put this?
"Expected-utility maximizers don't maximize utility."
Why? Because utility is not usually an ergodic quantity in the mathematical models used by economists, and maximizing its expected value doesn't mean much in the real world.
If you're interested in studying uncertainty at Ph.D. level, this set of scholarships may be for you:
www.zeit-stiftung.de/en/topics/de...
15 years ago I started SAM, the Society for the Advancement of Mediocrity.
It went alright, and I think it was an ok idea.
And please stay in touch and tell us what you find.
ergodicityeconomics.eo.page/4ct3k
Most of all: enjoy!
This is creative, living, science, and I think the fun we had while writing the book shines through on the page.
The result is a book that will enable its readers to go far beyond it. It's not a collection of papers, nor a comprehensive survey. It's a launch pad. Absorb what's in this book and take it in entirely new directions.
Then move to collections of individuals, then let them interact. At each level our thinking is informed by the ergodicity problem: how does our perspective change when we move from a statistical-ensemble perspective to a temporal perspective?
We start by introducing tools we found to be useful over the years, wherever they came from. Next we think about a single person making trivial decisions, then increase the complexity of the decisions one step at a time. We create a temporal context, and add ignorance.
And we ended up with a delightful book. A textbook that you can actually read because it outlines the beginning of a new field. It's deliberate, systematic, and maximally simple.
ergodicityeconomics.com/publications/
We unified, simplified, and systematized.
We collected earlier work by researchers who had also asked the ergodicity question, explicitly or implicitly. We traced this problem back over the centuries, found relevant tricks in books on physics, signal processing, economics, mathematics.
ergodicityeconomics.com/2024/02/05/e...
The ergodicity question remained the key to it all: do we think of randomness as variation across time or as variation across multiple systems, real or imagined?
So we called what we were doing "Ergodicity economics."
www.nature.com/articles/s41...
Dozens of students worked on smaller projects during @london-math-lab.bsky.social summer placements. The network of collaborators grew into different domains; machine learning, neuroscience, psychology.
Something genuinely new was emerging. While there are several excellent critiques of economic theory, including by some of its key architects, what we were developing was a constructive alternative.
In 2015, I presented a set of lectures on the topic in Chandigarh, India. My haphazard notes for these lectures, co-authored in a rush with Alex Adamou, became a secret classic, with tens of thousands of downloads from my homepage alone.
