Science has not progressed uniformly across spatial scales. For example, We can reliably predict motion of stars and electrons, but we do not yet have a reliable mathematical model to predict climatic variables, even though climatic scale is situated in between astronomical and atomic scale. It is not like astronomers and atomic scientists are more smart and intelligent than climate scientists, rather the fact is that climatic system is too chaotic. By saying chaotic, I mean things are unpredictable. For example, you can calculate how much force is required to throw a ball to a certain height, but you can not predict when a cyclone will occur and where. There is a famous saying that a butterfly flapping its wing can cause a tornado! (link)
Interestingly, many chaotic systems tend to follow a simple pattern: more intense events occur less often, and vice versa. Big wars occur less often. Less people are more rich. More intense earthquakes occur less often. Big fluctuations occur in a stock markets less often. Talking in mathematical terms, these phenomenon can be explained through a power law equation.
Origin of such behavior is not yet known. Bak and his co-authors, however, offer a little but wonderful insight through a simple model: the sand-pile model. Sand-grains are dropped one by one randomly on a table. Avalanches of different sizes occur. This simple model also follow the same pattern. Big avalanches occur less often than small avalanches. Also, it follows the same power law equation that other natural phenomenon exhibit.
Sand grains have friction. They can accumulate stress by supporting one over another. Once the pile reaches a critical state, dropping of a single sand grain will cause an avalanche; sand grain of same size can trigger avalanche of different sizes. The size of an avalanche will depend up on the configuration of the sand-pile prior to the avalanche. Bigger avalanches mean more stress release. It can be guessed that more time is required to accumulate more stress, therefore, bigger avalanches will occur less frequently.
This is unlike the case of friction-less matters. For example, if you have a bucket full of water and you add one drop of water, one drop of water will spill out of the bucket. You add two drops, two drops will spill out. And so on.
Classical economists treated economic systems as water buckets. Big fluctuations in markets were considered as results of big disturbances. More funnily, extraordinary market fluctuations were considered as unusual and thrown out of the analysis.
In reality, economic systems are like sand-piles, where individuals act like sand grains. They affect behavior of one another. Due to this inter-dependency, stress can be accumulated in the system, and when the system reaches a critical state, a little disturbance can cause even an extra-ordinary avalanche, or in economic terminology, a market crash.
Wars/conflicts do not occur because we are intolerant, but because of our ability to tolerate. We tolerate till a certain extent, and when our patience breaks we react. In larger social contexts, they are manifested in terms of wars/conflicts.
Bak call this phenomenon as 'self organized criticality'. A system organizes itself, and avalanches occur when it reaches a critical state, in order to release stress. Thus social disasters like wars and market crashes are inevitable; they occur due to our daily life activities. Any attempt to avoid such disasters is like operating a society at critical state, which is practicably impossible. And a slight disturbance somewhere in the system due to mistake (remember the proverb: to err is human) can lead to a super avalanche. This probably explains why societies fail due to too much of government control.
Interestingly, many chaotic systems tend to follow a simple pattern: more intense events occur less often, and vice versa. Big wars occur less often. Less people are more rich. More intense earthquakes occur less often. Big fluctuations occur in a stock markets less often. Talking in mathematical terms, these phenomenon can be explained through a power law equation.
Origin of such behavior is not yet known. Bak and his co-authors, however, offer a little but wonderful insight through a simple model: the sand-pile model. Sand-grains are dropped one by one randomly on a table. Avalanches of different sizes occur. This simple model also follow the same pattern. Big avalanches occur less often than small avalanches. Also, it follows the same power law equation that other natural phenomenon exhibit.
Sand grains have friction. They can accumulate stress by supporting one over another. Once the pile reaches a critical state, dropping of a single sand grain will cause an avalanche; sand grain of same size can trigger avalanche of different sizes. The size of an avalanche will depend up on the configuration of the sand-pile prior to the avalanche. Bigger avalanches mean more stress release. It can be guessed that more time is required to accumulate more stress, therefore, bigger avalanches will occur less frequently.
This is unlike the case of friction-less matters. For example, if you have a bucket full of water and you add one drop of water, one drop of water will spill out of the bucket. You add two drops, two drops will spill out. And so on.
Classical economists treated economic systems as water buckets. Big fluctuations in markets were considered as results of big disturbances. More funnily, extraordinary market fluctuations were considered as unusual and thrown out of the analysis.
In reality, economic systems are like sand-piles, where individuals act like sand grains. They affect behavior of one another. Due to this inter-dependency, stress can be accumulated in the system, and when the system reaches a critical state, a little disturbance can cause even an extra-ordinary avalanche, or in economic terminology, a market crash.
Wars/conflicts do not occur because we are intolerant, but because of our ability to tolerate. We tolerate till a certain extent, and when our patience breaks we react. In larger social contexts, they are manifested in terms of wars/conflicts.
Bak call this phenomenon as 'self organized criticality'. A system organizes itself, and avalanches occur when it reaches a critical state, in order to release stress. Thus social disasters like wars and market crashes are inevitable; they occur due to our daily life activities. Any attempt to avoid such disasters is like operating a society at critical state, which is practicably impossible. And a slight disturbance somewhere in the system due to mistake (remember the proverb: to err is human) can lead to a super avalanche. This probably explains why societies fail due to too much of government control.
