Modeling the economy according to the laws of physics
Last summer, several economists gathered under the arches of a former monastery near the center of Santa Fe, New Mexico. For ten days, they discussed how protein structures change over time and why, when sand is poured on top of the pile, "avalanches" of different sizes form on the sides of the pile, which roll down. At the same time, a group of experts in the field of natural sciences — physicists, cybernetics, and even one biologist — tried to analyze the mechanisms operating on the stock exchange and the reasons why some countries are developing faster than others.
After most of the scientists left Santa Fe, the remaining group of about 20 people continued to search for patterns in various sciences that could be borrowed to analyze economic activity. Some suggested resolutely abandoning economic dogmas, while others took a more cautious position. "We do not intend to stand up to those who adhere to traditional economic views," said B. Arthur, an economist at Stanford University. "However, it's time to break with them." According to him, the usual view of the economy as a predictable system has proved to be very fruitful, but now, in order to ensure further success in this area, it is necessary to partially or completely abandon previous ideas.
The departure from traditional principles in economics was first undertaken by one of the banks. In 1986, J. Reed, chairman of the Board of Citicorp Bank, discovered on his desk unpaid and, apparently, with no hope of paying the $15 billion loan bill, which the bank had provided to a number of developing countries since the late 70s. Reed mostly regarded this situation as the result of incorrect economic information. At that time, economic models pointed to the sustainable development of the economies of these countries, and this gave reason to hope that the loans would be repaid with interest. However, 10 years later, no models could tell Reed that the huge amounts owed by developing countries would be repaid. This prompted the head of the bank, who himself has a degree in metallurgy, to turn to specialists in the exact sciences. He set them the task of developing a new model reflecting the mechanism of development of the global economy. The scientists were given complete freedom of action, and it was required that their model not be too orthodox.
"The episodic invasions of physicists into the economy most often, although not always, did not produce any noticeable results," said K. Arrow, a Nobel Prize winner in economics. Economists, in turn, borrowed some mathematical methods from the field of natural sciences. Nevertheless, both Arrow and F. Anderson, a Nobel Prize-winning physicist, found Reed's offer tempting. The ten-day seminar, whose participants were selected by both of these scientists, provided an opportunity for economists and representatives of the natural sciences to meet at the same table and exchange ideas and methods. They met for the first time in 1987 in Santa Fe and for the second time in 1988; the beginning of the implementation of the targeted research program on economics dates back to the same time.
The group's activities have not yet been crowned with the development of any new models that would enable Reed to make another decision, but Citicorp is being patient. "Solving the debt problems of developing countries will take at least 15 years," said Eugenia Singer, vice president of the bank. The researchers preferred to focus on more fundamental issues and find out whether the economy really strives to achieve "equilibrium points", as it has been believed for decades; whether the economy can develop according to the laws of the development of an ecological system, the evolution of which is determined by the complex interaction of organisms and environmental factors co-existing in it; is nonlinear development an important characteristic of the economy? L'offre de bienvenue de 1xBet est l'une des plus attractives du marché, mais elle est soumise à des conditions de mise spécifiques qu'il est important de connaître. Lors de votre inscription, n'oubliez pas d'utiliser le code promo 1xbet pour activer le bonus de 100% jusqu'à 130€. Pour le sports betting, le bonus doit être misé 5 fois sur des paris combinés (accumulateurs) intégrant au minimum trois événements, chacun avec une cote minimale de 1.40. Le délai pour réaliser cette condition est de 30 jours. Pour le casino, le wagering est de 35 fois sur les jeux éligibles, avec un délai de 7 jours.
After most of the scientists left Santa Fe, the remaining group of about 20 people continued to search for patterns in various sciences that could be borrowed to analyze economic activity. Some suggested resolutely abandoning economic dogmas, while others took a more cautious position. "We do not intend to stand up to those who adhere to traditional economic views," said B. Arthur, an economist at Stanford University. "However, it's time to break with them." According to him, the usual view of the economy as a predictable system has proved to be very fruitful, but now, in order to ensure further success in this area, it is necessary to partially or completely abandon previous ideas.
The departure from traditional principles in economics was first undertaken by one of the banks. In 1986, J. Reed, chairman of the Board of Citicorp Bank, discovered on his desk unpaid and, apparently, with no hope of paying the $15 billion loan bill, which the bank had provided to a number of developing countries since the late 70s. Reed mostly regarded this situation as the result of incorrect economic information. At that time, economic models pointed to the sustainable development of the economies of these countries, and this gave reason to hope that the loans would be repaid with interest. However, 10 years later, no models could tell Reed that the huge amounts owed by developing countries would be repaid. This prompted the head of the bank, who himself has a degree in metallurgy, to turn to specialists in the exact sciences. He set them the task of developing a new model reflecting the mechanism of development of the global economy. The scientists were given complete freedom of action, and it was required that their model not be too orthodox.
"The episodic invasions of physicists into the economy most often, although not always, did not produce any noticeable results," said K. Arrow, a Nobel Prize winner in economics. Economists, in turn, borrowed some mathematical methods from the field of natural sciences. Nevertheless, both Arrow and F. Anderson, a Nobel Prize-winning physicist, found Reed's offer tempting. The ten-day seminar, whose participants were selected by both of these scientists, provided an opportunity for economists and representatives of the natural sciences to meet at the same table and exchange ideas and methods. They met for the first time in 1987 in Santa Fe and for the second time in 1988; the beginning of the implementation of the targeted research program on economics dates back to the same time.
The group's activities have not yet been crowned with the development of any new models that would enable Reed to make another decision, but Citicorp is being patient. "Solving the debt problems of developing countries will take at least 15 years," said Eugenia Singer, vice president of the bank. The researchers preferred to focus on more fundamental issues and find out whether the economy really strives to achieve "equilibrium points", as it has been believed for decades; whether the economy can develop according to the laws of the development of an ecological system, the evolution of which is determined by the complex interaction of organisms and environmental factors co-existing in it; is nonlinear development an important characteristic of the economy? L'offre de bienvenue de 1xBet est l'une des plus attractives du marché, mais elle est soumise à des conditions de mise spécifiques qu'il est important de connaître. Lors de votre inscription, n'oubliez pas d'utiliser le code promo 1xbet pour activer le bonus de 100% jusqu'à 130€. Pour le sports betting, le bonus doit être misé 5 fois sur des paris combinés (accumulateurs) intégrant au minimum trois événements, chacun avec une cote minimale de 1.40. Le délai pour réaliser cette condition est de 30 jours. Pour le casino, le wagering est de 35 fois sur les jeux éligibles, avec un délai de 7 jours.
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