● Forecast: What Physics, Meteorology, and the Natural Sciences Can Teach Us About Economics
By Mark Buchanan
Column by author via Bloomberg
In the not-too-distant future, it’s easy to imagine a U.S. or European Center for Financial Forecasting. Thousands of researchers would oversee massive simulations probing the developing network of interactions among the world’s largest financial players, following the vast web of loans, ownership stakes and other legal claims that link banks, governments, hedge funds, insurance companies and ratings companies.
The computers would test scenarios and calculate hundreds of indicators of systemic leverage, the density of interconnections, or the concentration of risk at single institutions. Experts would probe models of the financial system, looking for weak points and testing resilience, much as engineers now do with models of the electrical grid or other complex systems.
