Ecology, Economics, and Network Dynamics

Levy Economics Institute, Working Papers Series

53 Pages Posted: 16 Nov 2020

See all articles by Harold Hastings

Harold Hastings

Bard College at Simon's Rock

Tai Young-Taft

Bard College - The Levy Economics Institute

Chih-Jui Tsen

Bard College at Simon's Rock

Date Written: September 28, 2020

Abstract

In a seminal 1972 paper, Robert M. May asked: “Will a Large Complex System Be Stable?” and argued that stability (of a broad class of random linear systems) decreases with increasing complexity, sparking a revolution in our understanding of ecosystem dynamics. Twenty-five years later, May, Levin, and Sugihara translated our understanding of the dynamics of ecological networks to the financial world in a second seminal paper, “Complex Systems: Ecology for Bankers.” Just a year later, the US subprime crisis led to a near worldwide “great recession,” spread by the world financial network. In the present paper we describe highlights in the development of our present understanding of stability and complexity in network systems, in order to better understand the role of networks in both stabilizing and destabilizing economic systems. A brief version of this working paper, focused on the underlying theory, appeared as an invited feature article in the February 2020 Society for Chaos Theory in Psychology and the Life Sciences newsletter (Hastings et al. 2020).

Keywords: Stability, Complexity, May-Wigner, Noise, Subprime Crisis, Liquidity Shock

JEL Classification: C02, C62, E17, H12

Suggested Citation

Hastings, Harold and Young-Taft, Tai and Tsen, Chih-Jui, Ecology, Economics, and Network Dynamics (September 28, 2020). Levy Economics Institute, Working Papers Series, Available at SSRN: https://ssrn.com/abstract=3701110 or http://dx.doi.org/10.2139/ssrn.3701110

Harold Hastings (Contact Author)

Bard College at Simon's Rock ( email )

84 Alford Road
Great Barrington, MA Massachusetts 01230
United States

Tai Young-Taft

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000
United States

Chih-Jui Tsen

Bard College at Simon's Rock ( email )

84 Alford Road
Great Barrington, MA Massachusetts 01230
United States

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