Complexity theory and financial regulation
Publication date
2016-02-19
Authors
Battiston, Stefano
Farmer, J Doyne
Flache, Andreas
Garlaschelli, Diego
Haldane, Andrew G
Heesterbeek, Hans
Hommes, Cars
Jaeger, Carlo
May, Robert
Scheffer, Marten
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Supervisors
Document Type
Article
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Abstract
Traditional economic theory could not explain, much less predict, the near collapse of the financial system and its long-lasting effects on the global economy. Since the 2008 crisis, there has been increasing interest in using ideas from complexity theory to make sense of economic and financial markets. Concepts, such as tipping points, networks, contagion, feedback, and resilience have entered the financial and regulatory lexicon, but actual use of complexity models and results remains at an early stage. Recent insights and techniques offer potential for better monitoring and management of highly interconnected economic and financial systems and, thus, may help anticipate and manage future crises.
Keywords
Taverne, SDG 10 - Reduced Inequalities
Citation
Battiston, S, Farmer, J D, Flache, A, Garlaschelli, D, Haldane, A G, Heesterbeek, H, Hommes, C, Jaeger, C, May, R & Scheffer, M 2016, 'Complexity theory and financial regulation', Science, vol. 351, no. 6275, pp. 818-9. https://doi.org/10.1126/science.aad0299