It is widely believed that an equilibrium framework based on simple models, such as the
representative agent and bilateral bargaining, in a frictionless economy provides a consistent
framework in micro, macro, finance, and institutional economics. However, equilibrium
believes in self-stabilizing market and institutional convergence broken down when inherent
instability and non-predictable uncertainty emerge under nonlinear and social interactions.
Equilibrium illusions in economics and econometrics are pretty in math modeling but
dangerous in policy decision. Known examples are the Frisch model of noise-driven cycles,
the Lucas model of microfoundations, and the Coasian world of zero transactions. These
models not only violate basic laws in science but also lack evidence in economic history.
Their common problem is associated with linear Hamiltonian economics with symmetric
information without history. Economies are dissipative systems in nature, characterized by
symmetry breaking, information flow, a time arrow, and history. The many-body problem is
fundamentally different from the one-body and two-body problem in mathematics. Both
computational and natural experiments, such as a stock market crash and a transitional
depression, reveal the severe limitations of equilibrium thinking and structural changes from
evolutionary dynamics. The new science of complexity offers new tools of nonlinear
dynamics and non-stationary time series analysis. Existing puzzles in equilibrium
economics, such as persistent cycles, interruptive crises, market resilience, social
movements, and organizational diversity, can be better understood by nonlinear dynamic
models. Like the paradigm shift after Einstein in physics, the evolutionary perspective
provides a general framework, while equilibrium models serve as its special cases, since the
equilibrium picture is an approximation of economic complexity in a short-time window
taken from a long-term historical current.