Socio-Economic Complexity

Description & Aim

The aim of the NIAS-Lorentz Workshop Socio-Economic Complexity is to stimulate national and international interdisciplinary research and cooperation between economists, physicists, social scientists, ecologists, mathematicians, computer scientists and biologists to develop complex systems based approaches aimed at understanding systemic instabilities and crises in socio-economic systems.

      Existing economic models, for example, failed to predict the recent global financial crisis. Traditional models are based on highly restrictive assumptions and simplify away the complex network of interactions and nonlinear feedback mechanisms that characterize financial systems and economies for the sake of analytical tractability. In fact, current economic tools available to policy makers do not incorporate the institutional and financial structures needed to provide insights into liquidity crises, housing bubbles and other phenomena that occurred in the recent crisis. They also do not take into account social contagion and herding phenomena (e.g. through social media) that may play a key role in amplifying market movements.

      In recent years an alternative view has been developed using complexity models and tools from the natural sciences. The economy is considered as a complex adaptive system, emphasizing a bottom-up agent-based approach to model the financial system and socio-economic systems as a complex network of interacting agents. According to this view, aggregate market phenomena, such as financial crises, are thought of as emerging properties of complex systems resulting from the interaction of many heterogeneous households, firms, banks, investors, etc. spreading through social contagion and social media.

      In the natural science generic tools for early warning signals have been developed for early detection of critical transitions in complex natural systems. These methods and other complexity tools can be used and, if necessary, adapted, to anticipate critical transitions in complex socio-economic systems. This approach offers new tools for better management of complex socio-economic systems to prevent crisis and/or move the system to a more desired state. Research to apply these tools successfully to complex socio-economic systems requires a joint interdisciplinary effort of experts in complexity research from different fields.

The workshop brings together leading experts in complexity from different fields. The aim of the workshop is to stimulate and intensify national and international cooperation and to start concrete joint research projects applying complexity tools to the socio-economic domain. Each day of the workshop will focus on one common theme. Leading question is: how can complexity tools be used to address socio-economic applications and problems and to manage the fragility and resilience of complex socio-economic systems? The five domains and themes are:

-          Complexity & Contagion and Herding

-          Agent-Based Models & Epidemiology

-          Complex Networks,  Systemic Risk and Financial Fragility

-          Critical Transitions & Early Warning Signals

-          Policy: Managing Complexity