March 08, 2011 — Coral Gables — Experts are using knowledge gathered in fields as diverse as ecology and epidemiology to help understand the increasingly complex networks of the financial systems of the world. Drawing analogies with ecological food webs and mechanisms of infectious diseases, scientists are proposing models for policies geared towards creating financial stability.
Physicist Neil Johnson, director of the inter-disciplinary research group in Complexity at the University of Miami (UM) and world renowned expert in the field of complexity of collective behavior, talks about the potential risks of creating models based solely on analogies. His letter, “Ecology and Economics: Proposing policy by analogy is risky” is published in the January issue of the journal Nature.
“For me, the future of interdisciplinary work is in testing all models against rigorous statistical data, before analogies and policies are suggested,” says Johnson, professor of physics in the UM College of Arts and Sciences. “The world is ready to receive any wisdom that it can get, and we better make sure that it is good wisdom that is not built on wrong assumptions.”
According to Johnson, the best mathematical model is one that allows the actions of people, or the interactions of the particular object you are tracking, to change over all possible scales of space and time. For financial networks, that means creating a model that accounts for the variable lifespan of derivatives, the cancelation of orders, the expiration of particular financial contracts, temporary credits and any other transaction that can change as the network of financial agents is itself changing. “…It sounds obvious to the outside world, but the trouble is it’s a hard bridge to build mathematically,” Johnson says. “When we solve that problem for one area, we’ve solved it for all other areas.”
Looking at collective behavior from an interdisciplinary perspective marks a new beginning in scientific research, explains Johnson. His group has worked on the dynamics of real-world problems ranging from the financial domains to the physical, biological, medical and social domains.
“I think we are kind of unique as a group because we look across topics and fields in the same way,” Johnson says. “This gives us a kind of rigor when looking at these different areas. You get lots of data that is produced by objects interacting in space and time and that is the crucial element that needs to go into any model of interacting systems, whether it be a collection of cells or sellers.”
Johnson is also a prolific writer, having published more than 190 research articles in international journals, and two books: Financial Market Complexity (Oxford University Press, 2003) and 'Two's Company, Three is Complexity' (Oneworld Publishing, 2007). For more information visit: www.physics.miami.edu/~njohnson/
Read more about Neil Johnson.
