[EQ] Systemic Risks in Society and Economics

Systemic Risks in Society and Economics

Dirk Helbing1,2,3_

1 ETH Zurich,  Switzerland http://www.soms.ethz.ch, http://www.ccss.ethz.ch

2 Santa Fe Institute, Santa Fe, NM  USA and

3 Collegium Budapest—Institute for Advanced Study, Budapest, Hungary

Santa Fe Institute - November 18, 2009

            Available online PDF [13p. 5.8MB] at: http://bit.ly/cTDaf3

“……This contribution presents a summary of sources and drivers of systemic risks in socio-economic systems and related governance issues. The analysis is based on the theory of complex systems and illustrated by numerous examples….

Typical misunderstandings regarding the behavior and functioning of socio-economic systems will be addressed, and some current threats for the stability of social and economic systems are pointed out….”

Having discussed the particular challenges of complex systems, one may be left with the impression that such systems are just too difficult for us to handle. However, in the past decades, a variety of scientific techniques have been developed to address these challenges. These include
• large-scale data mining,
• network analysis,

• systems dynamics,

• scenario modeling,

• sensitivity analysis,

• non-equilibrium statistical physics,

• non-linear dyamics and chaos theory,

• systems theory and cybernetics,

• catastrophe theory,

• the statistics of extreme events,

• the theory of critical phenomena and, maybe most prominently these days,

• agent-based modeling [129–133]…..”

“……Among the success stories of complex systems research, one may mention the nobel prizes of Ilya Prigogine, Thomas Schelling, and Paul Krugmann. Some examples for application areas of complexity science are [144–148]

• the organization of the internet,

• modern epidemiology,

• the prevention of crowd stampedes,

• innovative solutions to improve traffic flow,

• the understanding of global climate change,

• the enhancement of the reliability of energy supply,

• modern disaster response management,

• prediction markets and other methods using the wisdom of crowds.

However, many socio-economic crises still occur, because the system dynamics is not well enough understood, leading to serious management mistakes…’

 

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