16 October 2015
"Cracking the maths behind the economy"
Horizon Magazine - Oct. 16th, 2015
By Benedict O'Donnell
"Omens of the 2008 financial crisis may have been all around us, we just did not know how to read them. Now, computer scientists, physicists and economists are studying the inner workings of complex networks to understand what went wrong and help stabilise tomorrow's financial markets.
... As a response to this failure, in 2010 the European Union brought together researchers from a broad spectrum of disciplines to whip up new ideas on how to make sense of the world's increasingly complex economy.
The so-called Forecasting Financial Crises (FOC) project broke away from the traditional top-down simplifications of macroeconomics, which assume that human beings make rational choices and that differences in their behaviour average out over statistically representative samples.
...According to Professor Guido Caldarelli, a theoretical physicist at the IMT Institute for Advanced Studies in Lucca, Italy, and coordinator of FOC, two networks may be very different in nature but still share enough similarities in how they behave for one network to offer insight into the inner workings of another.
... Network science is well suited to describe such intricate systems, but according to Prof. Caldarelli, addressing the complexity of financial markets will require innovative mathematics. He is busy developing more sophisticated calculation techniques to help understand multi-level complex systems, in a European project called MULTIPLEX.
In recent years, the European Union has funded over a dozen research projects on macroeconomic models that approach financial systems as complex, global networks of actors, several through its Global Systems Science initiative..."
For futher information, read the full version on the link below and/or open the attached pdf file.
- FOC Project Website: www.focproject.eu
- Multiplex Project Website: www.multiplexproject.eu
