A0793
Title: Complexity driven collapse of economic equilibria
Authors: Giacomo Livan - University College London (United Kingdom) [presenting]
Marco Bardoscia - London Institute for Mathematical Sciences (United Kingdom)
Matteo Marsili - International Centre for Theoretical Physics (Italy)
Abstract: Our economies have evolved to remarkable degrees of complexity. In the pursuit of ever increasing efficiency and growth, with nested production processes feeding each other in order to create products of greater sophistication from less sophisticated ones, down to raw materials. The engine of such an expansion have been competitive markets, whose functioning is described by the mathematical framework of General Equilibrium Theory (GET), which indeed shows that, under specific conditions, competitive markets achieve efficient allocation. Yet, we know from the study of heterogeneous systems in other disciplines, that complexity may bring about unintended consequences that are hard to anticipate, as they are non-trivial emergent properties. Such are the algorithmic and freezing phase transitions in high-dimensional random systems. We show that a non-trivial freezing transition also occurs in GET of complex economies, modelled as large random systems. Specifically we show that when the fraction of non-primary goods, i.e. goods that result as an output of a production process, exceeds a critical threshold, the economy freezes in a state where all production processes collapse.
