May's instability in large economies

Critical fragility in sociotechnical systems

Sociotechnical systems, where technological and human elements interact in a goal-oriented manner, provide important functional support to our societies. Here, we draw attention to the underappreciated concept of timeliness-i.e., system elements being available at the right place at the right time-that has been ubiquitously and integrally adopted as a quality standard in the modus operandi of sociotechnical systems. We point out that a variety of incentives, often reinforced by competitive pressures, prompt system operators to myopically optimize for efficiencies, running the risk of inadvertently taking timeliness to the limit of its operational performance, correspondingly making the system critically fragile to perturbations by pushing the entire system toward the proverbial "edge of a cliff." Invoking a stylized model for operational delays, we identify the limiting operational performance of timeliness, as a true critical point, where the smallest of perturbations can lead to a systemic collapse. Specifically for firm-to-firm production networks, we suggest that the proximity to critical fragility is an important ingredient for understanding the fundamental "excess volatility puzzle" in economics. Further, in generality for optimizing sociotechnical systems, we propose that critical fragility is a crucial aspect in managing the trade-off between efficiency and robustness.

Identifying new classes of financial price jumps with wavelets

We introduce an unsupervised classification framework that leverages a multiscale wavelet representation of time-series and apply it to stock price jumps. In line with previous work, we recover the fact that time-asymmetry of volatility is the major feature that separates exogenous, news-induced jumps from endogenously generated jumps. Local mean-reversion and trend are found to be two additional key features, allowing us to identify new classes of jumps. Using our wavelet-based representation, we investigate the endogenous or exogenous nature of cojumps, which occur when multiple stocks experience price jumps within the same minute. Perhaps surprisingly, our analysis suggests that a significant fraction of cojumps result from an endogenous contagion mechanism.

Upstreamness and downstreamness in input-output analysis from local and aggregate information

Ranking sectors and countries within global value chains is of paramount importance to estimate risks and forecast growth in large economies. However, this task is often non-trivial due to the lack of complete and accurate information on the flows of money and goods between sectors and countries, which are encoded in input-output (I-O) tables. In this work, we show that an accurate estimation of the role played by sectors and countries in supply chain networks can be achieved without full knowledge of the I-O tables, but only relying on local and aggregate information, e.g., the total intermediate demand per sector. Our method, based on a rank-1 approximation to the I-O table, shows consistently good performance in reconstructing rankings (i.e., upstreamness and downstreamness measures for countries and sectors) when tested on empirical data from the world input-output database. Moreover, we connect the accuracy of our approximate framework with the spectral properties of the I-O tables, which ordinarily exhibit relatively large spectral gaps. Our approach provides a fast and analytically tractable framework to rank constituents of a complex economy without the need of matrix inversions and the knowledge of finer intersectorial details.

Random matrix ensemble for the covariance matrix of Ornstein-Uhlenbeck processes with heterogeneous temperatures

We introduce a random matrix model for the stationary covariance of multivariate Ornstein-Uhlenbeck processes with heterogeneous temperatures, where the covariance is constrained by the Sylvester-Lyapunov equation. Using the replica method, we compute the spectral density of the equal-time covariance matrix characterizing the stationary states, demonstrating that this model undergoes a transition between stable and unstable states. In the stable regime, the spectral density has finite and positive support, whereas negative eigenvalues emerge in the unstable regime. We determine the critical line separating these regimes and show that the spectral density exhibits a power-law tail at marginal stability, with an exponent independent of the temperature distribution. Additionally, we compute the spectral density of the lagged covariance matrix characterizing the stationary states of linear transformations of the original dynamical variables. Our random-matrix model is potentially interesting to understand the spectral properties of empirical correlation matrices appearing in the study of complex systems.

Complexity-stability relationships in competitive disordered dynamical systems

Robert May famously used random matrix theory to predict that large, complex systems cannot admit stable fixed points. However, this general conclusion is not always supported by empirical observation: from cells to biomes, biological systems are large, complex, and often stable. In this paper, we revisit May's argument in light of recent developments in both ecology and random matrix theory. We focus on competitive systems, and, using a nonlinear generalization of the competitive Lotka-Volterra model, we show that there are, in fact, two kinds of complexity-stability relationships in disordered dynamical systems: if self-interactions grow faster with density than cross-interactions, complexity is destabilizing; but if cross-interactions grow faster than self-interactions, complexity is stabilizing.

Estimating the loss of economic predictability from aggregating firm-level production networks

To estimate the reaction of economies to political interventions or external disturbances, input-output (IO) tables-constructed by aggregating data into industrial sectors-are extensively used. However, economic growth, robustness, and resilience crucially depend on the detailed structure of nonaggregated firm-level production networks (FPNs). Due to nonavailability of data, little is known about how much aggregated sector-based and detailed firm-level-based model predictions differ. Using a nearly complete nationwide FPN, containing 243,399 Hungarian firms with 1,104,141 supplier-buyer relations, we self-consistently compare production losses on the aggregated industry-level production network (IPN) and the granular FPN. For this, we model the propagation of shocks of the same size on both, the IPN and FPN, where the latter captures relevant heterogeneities within industries. In a COVID-19 inspired scenario, we model the shock based on detailed firm-level data during the early pandemic. We find that using IPNs instead of FPNs leads to an underestimation of economic losses of up to 37%, demonstrating a natural limitation of industry-level IO models in predicting economic outcomes. We ascribe the large discrepancy to the significant heterogeneity of firms within industries: we find that firms within one sector only sell 23.5% to and buy 19.3% from the same industries on average, emphasizing the strong limitations of industrial sectors for representing the firms they include. Similar error levels are expected when estimating economic growth, CO2 emissions, and the impact of policy interventions with industry-level IO models. Granular data are key for reasonable predictions of dynamical economic systems.

A Wealth Distribution Agent Model Based on a Few Universal Assumptions

We propose a new agent-based model for studying wealth distribution. We show that a model that links wealth to information (interaction and trade among agents) and to trade advantage is able to qualitatively reproduce real wealth distributions, as well as their evolution over time and equilibrium distributions. These distributions are shown in four scenarios, with two different taxation schemes where, in each scenario, only one of the taxation schemes is applied. In general, the evolving end state is one of extreme wealth concentration, which can be counteracted with an appropriate wealth-based tax. Taxation on annual income alone cannot prevent the evolution towards extreme wealth concentration.

Composition Dependent Instabilities in Mixtures with Many Components

Understanding the phase behavior of mixtures with many components is important in many contexts, including as a key step toward a physics-based description of intracellular compartmentalization. Here, we study phase ordering instabilities in a paradigmatic model that represents the complexity of-e.g., biological-mixtures via random second virial coefficients. Using tools from free probability theory we obtain the exact spinodal curve and the nature of instabilities for a mixture with an arbitrary composition, thus lifting an important restriction in previous work. We show that, by controlling the concentration of only a few components, one can systematically change the nature of the spinodal instability and achieve demixing for realistic scenarios by a strong composition imbalance amplification. This results from a nontrivial interplay of interaction complexity and entropic effects due to the nonuniform composition. Our approach can be extended to include additional systematic interactions, leading to a competition between different forms of demixing as density is varied.

Generalized Lotka-Volterra Equations with Random, Nonreciprocal Interactions: The Typical Number of Equilibria

We compute the typical number of equilibria of the generalized Lotka-Volterra equations describing species-rich ecosystems with random, nonreciprocal interactions using the replicated Kac-Rice method. We characterize the multiple-equilibria phase by determining the average abundance and similarity between equilibria as a function of their diversity (i.e., of the number of coexisting species) and of the variability of the interactions. We show that linearly unstable equilibria are dominant, and that the typical number of equilibria differs with respect to the average number.

Eigenvector localization in hypergraphs: Pairwise versus higher-order links

Localization behaviors of Laplacian eigenvectors of complex networks furnish an explanation to various dynamical phenomena of the corresponding complex systems. We numerically examine roles of higher-order and pairwise links in driving eigenvector localization of hypergraphs Laplacians. We find that pairwise interactions can engender localization of eigenvectors corresponding to small eigenvalues for some cases, whereas higher-order interactions, even being much much less than the pairwise links, keep steering localization of the eigenvectors corresponding to larger eigenvalues for all the cases considered here. These results will be advantageous to comprehend dynamical phenomena, such as diffusion, and random walks on a range of real-world complex systems having higher-order interactions in better manner.

Monitoring supply networks from mobile phone data for estimating the systemic risk of an economy

Remarkably little is known about the structure, formation, and dynamics of supply- and production networks that form one foundation of society. Neither the resilience of these networks is known, nor do we have ways to systematically monitor their ongoing change. Systemic risk contributions of individual companies were hitherto not quantifiable since data on supply networks on the firm-level do not exist with the exception of a very few countries. Here we use telecommunication meta data to reconstruct nationwide firm-level supply networks in almost real-time. We find the probability of observing a supply-link, given the existence of a strong communication-link between two companies, to be about 90%. The so reconstructed supply networks allow us to reliably quantify the systemic risk of individual companies and thus obtain an estimate for a country's economic resilience. We identify about 65 companies, from a broad range of company sizes and from 22 different industry sectors, that could potentially cause massive damages. The method can be used for objectively monitoring change in production processes which might become essential during the green transition.

Network structural origin of instabilities in large complex systems

A central issue in the study of large complex network systems, such as power grids, financial networks, and ecological systems, is to understand their response to dynamical perturbations. Recent studies recognize that many real networks show nonnormality and that nonnormality can give rise to reactivity-the capacity of a linearly stable system to amplify its response to perturbations, oftentimes exciting nonlinear instabilities. Here, we identify network structural properties underlying the pervasiveness of nonnormality and reactivity in real directed networks, which we establish using the most extensive dataset of such networks studied in this context to date. The identified properties are imbalances between incoming and outgoing network links and paths at each node. On the basis of this characterization, we develop a theory that quantitatively predicts nonnormality and reactivity and explains the observed pervasiveness. We suggest that these results can be used to design, upgrade, control, and manage networks to avoid or promote network instabilities.

Eigenvalue ratio statistics of complex networks: Disorder versus randomness

The distribution of the ratios of consecutive eigenvalue spacings of random matrices has emerged as an important tool to study spectral properties of many-body systems. This article numerically investigates the eigenvalue ratios distribution of various model networks, namely, small-world, Erdős-Rényi random, and (dis)assortative random having a diagonal disorder in the corresponding adjacency matrices. Without any diagonal disorder, the eigenvalues ratio distribution of these model networks depict Gaussian orthogonal ensemble (GOE) statistics. Upon adding diagonal disorder, there exists a gradual transition from the GOE to Poisson statistics depending upon the strength of the disorder. The critical disorder (w_{c}) required to procure the Poisson statistics increases with the randomness in the network architecture. We relate w_{c} with the time taken by maximum entropy random walker to reach the steady state. These analyses will be helpful to understand the role of eigenvalues other than the principal one for various network dynamics such as transient behavior.

Quantifying firm-level economic systemic risk from nation-wide supply networks

Crises like COVID-19 exposed the fragility of highly interdependent corporate supply networks and the complex production processes depending on them. However, a quantitative assessment of individual companies' impact on the networks' overall production is hitherto non-existent. Based on a unique value added tax dataset, we construct the firm-level production network of an entire country at an unprecedented granularity and present a novel approach for computing the economic systemic risk (ESR) of all firms within the network. We demonstrate that 0.035% of companies have extraordinarily high ESR, impacting about 23% of the national economic production should any of them default. Firm size cannot explain the ESR of individual companies; their position in the production networks matters substantially. A reliable assessment of ESR seems impossible with aggregated data traditionally used in Input-Output Economics. Our findings indicate that ESR of some extremely risky companies can be reduced by introducing supply chain redundancies and changes in the network topology.

Well-mixed Lotka-Volterra model with random strongly competitive interactions

The random Lotka-Volterra model is widely used to describe the dynamical and thermodynamic features of ecological communities. In this work, we consider random symmetric interactions between species and analyze the strongly competitive interaction case. We investigate different scalings for the distribution of the interactions with the number of species and try to bridge the gap with previous works. Our results show two different behaviors for the mean abundance at zero and finite temperature, respectively, with a continuous crossover between the two. We confirm and extend previous results obtained for weak interactions: at zero temperature, even in the strong competitive interaction limit, the system is in a multiple-equilibria phase, whereas at finite temperature only a unique stable equilibrium can exist. Finally, we establish the qualitative phase diagrams and compare the species abundance distributions in the two cases.

A robust transition to homochirality in complex chemical reaction networks

Homochirality, i.e. the dominance across all living matter of one enantiomer over the other among chiral molecules, is thought to be a key step in the emergence of life. Building on ideas put forward by Frank and many others, we proposed recently one such mechanism in Laurent et al. (Laurent, 2021 Proc. Natl Acad. Sci. USA 118 , e2012741118. ( doi:10.1073/pnas.2012741118 )) based on the properties of large out of equilibrium chemical networks. We showed that in such networks, a phase transition towards a homochiral state is likely to occur as the number of chiral species in the system becomes large or as the amount of free energy injected into the system increases. This paper aims at clarifying some important points in that scenario, not covered by our previous work. We first analyse the various conventions used to measure chirality, introduce the notion of chiral symmetry of a network and study its implications regarding the relative chiral signs adopted by different groups of molecules. We then propose a generalization of Frank’s model for large chemical networks, which we characterize completely using methods of random matrices. This analysis is extended to sparse networks, which shows that the emergence of homochirality is a robust transition.

Dynamical systems on large networks with predator-prey interactions are stable and exhibit oscillations

We analyze the stability of linear dynamical systems defined on sparse, random graphs with predator-prey, competitive, and mutualistic interactions. These systems are aimed at modeling the stability of fixed points in large systems defined on complex networks, such as ecosystems consisting of a large number of species that interact through a food web. We develop an exact theory for the spectral distribution and the leading eigenvalue of the corresponding sparse Jacobian matrices. This theory reveals that the nature of local interactions has a strong influence on a system's stability. We show that, in general, linear dynamical systems defined on random graphs with a prescribed degree distribution of unbounded support are unstable if they are large enough, implying a tradeoff between stability and diversity. Remarkably, in contrast to the generic case, antagonistic systems that contain only interactions of the predator-prey type can be stable in the infinite size limit. This feature for antagonistic systems is accompanied by a peculiar oscillatory behavior of the dynamical response of the system after a perturbation, when the mean degree of the graph is small enough. Moreover, for antagonistic systems we also find that there exist a dynamical phase transition and critical mean degree above which the response becomes nonoscillatory.

Counting equilibria of large complex systems by instability index

We consider a nonlinear autonomous system of [Formula: see text] degrees of freedom randomly coupled by both relaxational ("gradient") and nonrelaxational ("solenoidal") random interactions. We show that with increased interaction strength, such systems generically undergo an abrupt transition from a trivial phase portrait with a single stable equilibrium into a topologically nontrivial regime of "absolute instability" where equilibria are on average exponentially abundant, but typically, all of them are unstable, unless the dynamics is purely gradient. When interactions increase even further, the stable equilibria eventually become on average exponentially abundant unless the interaction is purely solenoidal. We further calculate the mean proportion of equilibria that have a fixed fraction of unstable directions.

Graph hierarchy: a novel framework to analyse hierarchical structures in complex networks

Trophic coherence, a measure of a graph's hierarchical organisation, has been shown to be linked to a graph's structural and dynamical aspects such as cyclicity, stability and normality. Trophic levels of vertices can reveal their functional properties, partition and rank the vertices accordingly. Trophic levels and hence trophic coherence can only be defined on graphs with basal vertices, i.e. vertices with zero in-degree. Consequently, trophic analysis of graphs had been restricted until now. In this paper we introduce a hierarchical framework which can be defined on any simple graph. Within this general framework, we develop several metrics: hierarchical levels, a generalisation of the notion of trophic levels, influence centrality, a measure of a vertex's ability to influence dynamics, and democracy coefficient, a measure of overall feedback in the system. We discuss how our generalisation relates to previous attempts and what new insights are illuminated on the topological and dynamical aspects of graphs. Finally, we show how the hierarchical structure of a network relates to the incidence rate in a SIS epidemic model and the economic insights we can gain through it.

Properties of Equilibria and Glassy Phases of the Random Lotka-Volterra Model with Demographic Noise

We study a reference model in theoretical ecology, the disordered Lotka-Volterra model for ecological communities, in the presence of finite demographic noise. Our theoretical analysis, valid for symmetric interactions, shows that for sufficiently heterogeneous interactions and low demographic noise the system displays a multiple equilibria phase, which we fully characterize. In particular, we show that in this phase the number of locally stable equilibria is exponential in the number of species. Upon further decreasing the demographic noise, we unveil the presence of a second transition like the so-called "Gardner" transition to a marginally stable phase similar to that observed in the jamming of amorphous materials. We confirm and complement our analytical results by numerical simulations. Furthermore, we extend their relevance by showing that they hold for other interacting random dynamical systems such as the random replicant model. Finally, we discuss their extension to the case of asymmetric couplings.

Nonlinearity-generated resilience in large complex systems

We consider a generic nonlinear extension of May's 1972 model by including all higher-order terms in the expansion around the chosen fixed point (placed at the origin) with random Gaussian coefficients. The ensuing analysis reveals that as long as the origin remains stable, it is surrounded by a "resilience gap": there are no other fixed points within a radius r_{*}>0 and the system is therefore expected to be resilient to a typical initial displacement small in comparison to r_{*}. The radius r_{*} is shown to vanish at the same threshold where the origin loses local stability, revealing a mechanism by which systems close to the tipping point become less resilient. We also find that beyond the resilience radius the number of fixed points in a ball surrounding the original point of equilibrium grows exponentially with N, making systems dynamics highly sensitive to far enough displacements from the origin.

How directed is a directed network?

The trophic levels of nodes in directed networks can reveal their functional properties. Moreover, the trophic coherence of a network, defined in terms of trophic levels, is related to properties such as cycle structure, stability and percolation. The standard definition of trophic levels, however, borrowed from ecology, suffers from drawbacks such as requiring basal nodes, which limit its applicability. Here we propose simple improved definitions of trophic levels and coherence that can be computed on any directed network. We demonstrate how the method can identify node function in examples including ecosystems, supply chain networks, gene expression and global language networks. We also explore how trophic levels and coherence relate to other topological properties, such as non-normality and cycle structure, and show that our method reveals the extent to which the edges in a directed network are aligned in a global direction.