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Complexity Research and Economic Growth. Sorin Solomon Racah Institute of Physics HUJ Israel Complex Multi-Agent Systems Division, ISI Turin Lagrange Interdisciplinary Lab for Excellence In Complexity. More Is Different Sorin Solomon HUJ and ISI. Real world is controlled … - PowerPoint PPT Presentation
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Complexity Researchand
Economic GrowthSorin Solomon
Racah Institute of Physics HUJ Israel Complex Multi-Agent Systems Division, ISI Turin
Lagrange Interdisciplinary Lab for Excellence In Complexity
More Is DifferentSorin Solomon
HUJ and ISI
Real world is controlled …– by the exceptional, not the mean; – by the catastrophe, not the steady drip; – by the very rich, not the ‘middle class’.
we need to free ourselves from ‘average’ thinking.
Philip Anderson
950C
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1cm
97
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The breaking of macroscopic linear extrapolation
?Extrapolation?
BOILING PHASE TRANSITION More is different: a single molecule does not boil at 100C0
Simplest Example of a “More is Different” Transition
95 97 99 101
Example of “MORE IS DIFFERENT” transition in Finance:
Instead of Water Level: -economic Index(Dow-Jones etc…)
The crashes are the result of many traders interactions.MORE is DIFFERENT: A market with a single trader would never have crashes
Instead of temperature (energy / matter):
Exchange rate/interest rate
Value At Risk / liquid funds
Equity Price / Dividends
Equity Price / fundamental value
Taxation (without representation)/ Tea
Reality curves
DVD
VCR
CARS in USA 1895-1930
Product Propagation
Bass extrapolation formula vs
microscopic representation
Actual sales
Extrapolation
Stock market shock explainedPhysicists model recent trading frenzy.
Market 'spikes' are seen by traders as freak events.Physicists expect them
Lev Muchnik Phys. Scripta
Stock market shock explainedPhysicists model recent trading frenzy.
Market 'spikes' are seen by traders as freak events.Physicists expect them
Small changes in product quality, price, external conditions can produce large effects(e.g. large market fluctuations)
Small deterioration in credit market can trigger large waves of bankruptcies
“Levy, Solomon and Levy's
Microscopic Simulation of Financial Markets
points us towards the future of financial economics.
If we restrict ourselves to models which can be solved analytically, we will be modeling for our mutual entertainment, not to maximize explanatory or predictive power."
--HARRY M. MARKOWITZ, Nobel Laureate in Economics
Executive Abstract:
The Multi-Agent Complex Systems approach identifies-singular local elements of change / growth (even at early stages where, as whole, the system seems in regress)
-spatio-temporal patterns of growth relevant resources - socio-economic / human interactive causal mechanisms leading to growth (e.g. education / cultural level / tradition).
Concrete interdisciplinary example: post-liberalization Poland- identifies emergence of resilient, sustainable, developing patterns likely to support sustainable global growth
- prediction of (space-time) singular fluctuation patterns that may lead to increased social inequality and economic instability (but also to novelty emergence)
The classical paradigms fail in predicting emergence of novelty / development in bio/ cogni / socio/ econo systems
- Extension of study to other regions / disciplines
“Almost all the social phenomena…
obey the logistic growth” Elliot W Montroll
I would urge… logistic equation early in the education
… in the everyday world of politics and economics Lord Robert May
- Nonlinear Terms (Competion/Saturation) Growth ~ Size“continuum” Logistic Solution: uniform in space and time:
< 0
Size
TIME
In reality, in Growth ~ Size, is the result of multi-agent spatio-temporal distributed discrete contributions
This leads to a complex solution presenting fractal / intermittentcollective macro-objects with self-organized adaptive behavior
Theorem: resilience and sustainability
even for <><0
Logistic
Differential Equation < 0
Logistic Multi-Agent Prediction
TIME
Size
EXAMPLE of Theoretical Applied Science
APPLICATION: Liberalization Experiment Poland Economy after 1989
+ MICRO growth___________________
=> MACRO growth
1990 MACRO decay (90)
1992 MACRO growth (92)
1991 MICRO growth (91)
GNP
89 90 91 92
THEOREM (Statistical Mechanics Mathematics)
Global analysis prediction
Complexity prediction
Education 88
MACRO decay
Maps by the group of Social Psychologist Andrzej Nowak (Warsaw U.)
Economic Growth is in turn “A’s” for Political Transformation
Voting for Reformist Parties
Nowak
fractal space distributionPrediction of campaign success (15/17) Goldenberg
Air-view of a sub-urban neighborhood;
crosses on the roofs indicate air-conditioner purchase
Desertification/ Reclaim space-time localized patterns
Mediterranean; uniform 500mm
Semi-arid; patchy
Desert;uniform200mm
Lavee+Sarah
Globalization (efficient but unstable fluctuations)
Local Consumption Economy (inefficient but very stable (if population is stable))
Theorem: Logistic Multi-Agent Systems=>Intermittent Fluctuations
-emergence of High-Tech communities-start-ups connections to previous businesses-entrepreneurs emerging from old businesses-partners having previous common institutions
Piemonte
Belarus
Piemonte
Romania
Future and on-going studies
Conclusions• The connections between the main
ubiquitous complexity features Pareto-Zipf scaling laws / Levy-stable fat-tail fluctuations,
Fractal-Intermittent singular spatio-temporal Growth patterns, Logistic Malthus-Verhulst-Lotka-Volterra-Eigen-Schuster system Percolation, phase transitions, Emergence of adaptive objects
can be understood and expressed within a comprehensive coherent interdisciplinary research framework.
• Its applicability in monitoring and inducing novelty emergence, social change, stable economic growth and sustainable development has been demonstrated.