Sunday, March 26, 2006

Eonomic Instability

In this post, I want to focus on a very interesting paper published by Y. Louzoun et. al. in 2003 (Artificial Life vol. 9 n. 4 - MIT Press). Their paper shows that world-size global market lead to economic instability. The model is based on an extended Lokta-Voltera equation applied on a two-dimensional lattice with two main parameters: R is the range over which competition between agents can take place, and D is a diffusion coefficient of wealth. They argue that extreme values for globalization R and redistribution D, as advocated respectively by extreme capitalism and extreme socialism, are equally counterproductive and possibly disastrous due to catastrophic fluctuations. However, there is a regional globalization scale that seems to optimize the system. They conclude that moderate-size regional markets (R ~ system size / 10) partially protected from external competition, are the optimal economic configuration. Well, I would like to have enough time to be able to work on that subject. Interesting, no ? (Earth image from space - Courtesy Nasa).

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