Thursday, October 09, 2008
Models to compute and predict our current economic chaos?
Here is an interesting article on the resistance of economic theorists to using modeling approaches that have proven useful in predicting dramatic and sudden transitions. Such models have been successfully applied to predicting heart attacks, epileptic seizures, stock market bubbles, eutrophication of lakes, etc. They are based in part on the observation that variance in an apparent steady state begins to change in predictable ways in advance of large rapid transitions. Modeling the dynamics of a systems of agents by simulating their workings from the bottom up can reveal how instabilities or phase transitions can rise in a system of linked agents by trouble in one of them.