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SUMMARY:Marginally stable economies? - Jean-Philippe Bouchaud (CFM)
DTSTART;VALUE=DATE-TIME:20200207T120000Z
DTEND;VALUE=DATE-TIME:20200207T130000Z
UID:https://talks.ox.ac.uk/talks/id/bace9b17-4d92-42dd-a57f-e545c003a4c1/
DESCRIPTION:Our understanding of so-called “complex systems” has made 
 giant leaps forward in the last 40 years\, due in particular to a flurry o
 f activity in statistical physics\, theoretical ecology\, computer science
  and mathematics. Some of the concepts that have emerged should no doubt p
 lay an important role in economics as well\, where the main issue is the a
 ggregate properties of a large number of partially informed\, heterogeneou
 s and interacting agents. These ingredients are essentially the same as th
 ose present in the “complex systems” studied by physicists.\n\nOf part
 icular interest is notion of marginal stability (also known as “self-org
 anized criticality”\, or SOC). As a rule\, complex optimization leads to
  fragilities and instabilities. Radical uncertainty may derive from radica
 l complexity.\n\nAn enticing illustration concerns the stability of networ
 k economies. Why is the output of large economies so volatile\, when fluct
 uations should average out quickly as the size of the economy grows? In th
 e 90's physicists Bak and Chen and economists Scheinkman and Woodford surm
 ised that large economies spontaneously evolve towards an anomalously frag
 ile marginally stable state of the type described above. In absence of a c
 onvincing model however\, this SOC scenario failed to gain acceptance in t
 he economics community.\n\nTogether with José Moran\, Jean-Philippe Bouch
 aud introduced [1] a general economic model where SOC occurs naturally\, w
 ith idiosyncratic shocks being propagated and amplified along a network of
  interconnected firms. Using results from Random Matrix Theory\, we find t
 hat increased interlinkages\, profit seeking and/or reduced substitutabili
 ty between firms' inputs drive the system to the edge of stability\, as do
 es adding firms to the system. This scenario is strongly reminiscent of si
 milar ideas in an ecological context\, where the disappearance of a single
  species can lead to mass extinctions mediated by network effects.\n\n[1] 
 Moran\, José\, and Jean-Philippe Bouchaud. "May's instability in large ec
 onomies." Physical Review E 100.3 (2019): 032307.\n\nAbout the speaker:\nJ
 ean-Philippe Bouchaud is the Chairman and Chief Scientist of CFM. He super
 vises the research team with Marc Potters.\n\nHe founded ‘Science and Fi
 nance’ in 1994\, which merged with CFM in 2000. Prior to CFM he was a re
 searcher at the Centre National de la Recherche Scientifique until 1992. A
 fter a year at the Cavendish Laboratory in Cambridge\, he joined the Servi
 ce de Physique de l’État Condensé at the Commissariat à l’Energie A
 tomique in Saclay\, France\, until 2004. He holds a PhD in theoretical phy
 sics from the École Normale Supérieure (ENS) in Paris.Jean-Philippe teac
 hes regularly at the ENS and was elected at Collège de France on the Bett
 encourt Innovation Chair for 2020. He has been a Member of the French Acad
 émie des Sciences since December 2017.\n\nPlease register on Eventbrite o
 r contact complexity@inet.ox.ac.uk for more information.\nSpeakers:\nJean-
 Philippe Bouchaud (CFM)
LOCATION:Manor Road Building (Seminar Room C)\, Manor Road OX1 3UQ
TZID:Europe/London
URL:https://talks.ox.ac.uk/talks/id/bace9b17-4d92-42dd-a57f-e545c003a4c1/
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