Jean-Philippe Bouchaud (Capital Fund Management, Paris, France) - 22 mai 2014.
« The Economic Crisis is a Crisis for Economic Theory » recently wrote Alan Kirman. The theory in question posits that agents are rational and that markets are “efficient”, i.e. prices perfectly reflect all available information in an unbiased way. Such markets are fundamentally stable : bubbles do not exist, crises can only be triggered by exogenous news or events, but never a result of their own internal dynamics. Mainstream models cannot account for endogenous crises.
Still, this idealized (idyllic ?) view of the world is challenged by numerous empirical observations that strongly sug- gest that markets fluctuations are primarily of endogenous origin, amplified by multiple feedback loops, some of them induced by behavioral biases, such as herding or panic. We shall discuss some simple theoretical models that shed a useful light on socioeconomic and financial phenomena. We will also review how models, rules and regulation can by themselves contribute to market instabilities. The (unfortunate) com- plexity of economic systems raises deep, fasci- nating, and urgent questions, for which the con- cepts and methods of statistical physics may be well adapted.
You can also watch this video on the multimedia site ENS :savoirs.ens.fr