How do Complex Macroeconomic phenomena emerge from simple Microeconomic behaviour?

Emanuel Zuckerberger1,2 and Sorin Solomon3 Institute for Economic Forecasting, Bucharest, Romania 2 Israel Electric Corporation, Haifa, Israel 3 Racah Institute of Physics, Hebre !ni"ersity, #erusalem, Israel
1

Abstract For a long while it was customary in many branches of science to formalize a collection of many similar objects in terms of mean field continuous functions re!resenting the a"erage of their indi"idual !ro!erties# $ften, this re!resentati"e agent % mean field % continuum % linear way of thinking, is what ke!t the classical sciences as se!arated sub&cultures# 'ndeed, the great conce!tual barriers se!arating the scientific disci!lines and the accom!anying !arado(es connected to the emergence of life, intelligence, trade, firms, credit market and economies arise e(actly from the failure of the mean field % re!resentati"e agent assum!tions# )hen *ore 's +ifferent ,the title of the article !ublished 3- years ago by .obel /aureate 0hil 1nderson2 the singular, e(treme, "ery rare e"ents and interactions become crucial and so life emerges from chemistry, conscience from life, social institutions %firms %markets from conscious interacting indi"iduals, economies from firms etc# $ur basic a!!roach is that of modeling the economy as a system of heterogeneous interacting agents with sim!le rules of beha"ior and with sim!le rules go"erning their interaction# 'n a series of models re!resenting such heterogeneous interacting agents ,say firms with their rules of beha"iour at a microeconomic le"el2, Solomon and co&workers ha"e disco"ered, using analytical, simulation and em!irical methods, the emergence of ada!ti"e e(ce!tionally resilient collecti"e objects ,com!le( macroeconomic !henomena2 out of the interactions of the agents# 1mong the many analytical, simulation and em!irical data !rocessing methods used to study the emergence in economic systems ,statistical mechanics, stochastic !rocesses, !hase transitions, !ercolation, belief !ro!agation, o!inion dynamics2, we !resent here a grou! of ideas which is the most !romising and likely to ad"ance a long range "ision by enhancing the !redictability, inter"ention and !lanning abilities in social&economic systems# 3his grou! of ideas has de"elo!ed around the disco"ery that random autocatalytic elements may self&organize s!ontaneously in highly resilient localized collecti"e objects and change dramatically the nai"ely e(!ected beha"iour of the entire system# 1. Introduction For a long while, most models in economics and in finance assumed homogeneous and rational agents# Furthermore they assumed that the agents act in isolation and are linked only through the market mechanism# 3hese assum!tions are highly !roblematic since4 ,i2 !eo!le are ob"iously heterogeneous in their beliefs and !references, ,ii2 it has been e(tensi"ely documented that !eo!le systematically de"iate from rational choice and ,iii2 indi"iduals directly interact with each other in many ways# 5et these assum!tions ha"e become standard in economic modelling, not because they ha"e been inferred from obser"ations of beha"iour, but rather because they !ro"ide a con"enient analytically tractable framework# E"en when it is asserted that !eo!le, in reality, beha"e 6irrationally7 it is only meant that their beha"iour does not satisfy the restricti"e a(ioms which ha"e become standard in economic theory# 3his led .obel /aureate 8obert Solow to remark4 $aybe there is in human nature a %eep&seate% per"erse pleasure in a%opting an% %efen%ing a holly counterintuiti"e %octrine that lea"es the uninitiate% peasant on%ering hat planet he or she is on #

)e consider that one could and ,res!ecti"ely2 should em!loy microsco!ic ,agent&based2 methods to analyze economic systems, without the necessity of making these homogeneity and rationality assum!tions# 9y so doing one could allow for the direct interaction between agents and gi"e ultimately a meaningful micro&foundation to macro& economics instead of the !seudo&foundation !ro"ided by the re!resentati"e agent# 3he basic a!!roach en"isaged by us is that of modelling the economy as a system of heterogeneous interacting agents with sim!le rules of beha"iour and with sim!le rules go"erning their interaction# 'n some notable cases there were !ro"ed analytically "ery salient and sur!rising features such as the s!ontaneous emergence of ada!ti"e collecti"e entities that increase dramatically the resilience of the entire system ,market2 ,5aari et al#, 2--:; +o"er et al#, 2--<2 the e=uality of the market fluctuations> scaling e(!onent to the 0areto wealth distribution e(!onent ,Solomon and /e"i, 2--32 and the finite size corrections to the !ower law of firms ,*alcai et al#, 1<<<; 9lank and Solomon, 2---2# ?owe"er, in order to !redict and control !articular a!!lications ,indi"idual credit status, stability of !articular markets2 and to e(tend the results to more com!licated systems it is often necessary to use simulations# 3he idea of microsco!ic simulation as de"elo!ed in /e"i, /e"i and Solomon ,1<<@, 2---2 is sim!le4 one can in"estigate a com!le( economic system with many heterogeneous and !ossibly bounded&rational interacting agents by re!resenting each agent indi"idually in a com!uter !rogram, and by monitoring and recording the system dynamics resulting from the indi"idualsA actions and interactions# 3his a!!roach enables one to e(tend the modelling ca!abilities, and to in"estigate the effects of heterogeneity, bounded rationality, learning and the direct interaction of agents# 'n !rinci!le one could re!resent an economy ,as well as any other system2 arbitrarily faithfully within a com!uter simulation# ?owe"er this !er se would not necessarily lead to a significant im!ro"ement of the understanding of the system4 instead of one natural system that one does not understand their will be two systems, one in nature and one in the com!uter, which one does not understand# 3hus the definition of the models re!resenting a system should only ca!ture well defined features that are belie"ed to be crucial for re!roduction of the stylized facts of the system under study# $ne can then analyse the model analytically, numerically or by com!uter e(!eriments and decide, by com!arison with the em!irical facts, if indeed the hy!otheses im!licit in the model definition e(!lain, re!roduce and !redict the actual system beha"iour ,Solomon and /e"i, 2--32 and its reactions to e(!erimental mani!ulations# 1mong the many analytical, simulation and em!irical data !rocessing methods which ha"e been used by Solomon and co&workers to study the emergence in economic systems ,statistical mechanics, stochastic !rocesses, !hase transitions, !ercolation, belief !ro!agation, o!inion dynamics2 this !a!er describes the most !romising, likely to ad"ance our long range "ision by enhancing the !redictability, inter"ention and !lanning abilities in social&economic systems4 the grou! of ideas which has de"elo!ed around the disco"ery that random autocatalytic elements may self& organize s!ontaneously in highly resilient localized collecti"e objects and change dramatically the nai"ely e(!ected beha"iour of the entire system# )e describe the theoretical results, the a!!lication to the !ost&liberalization 0olish economy, the e(tension to generic after&shock dynamics and the role of the generalized /eontief '%$ matri( in the di"ergence&con"ergence&alignment of cou!led economic systems at the national and international le"el# 2. ogistic s!stems" from Malthus to #igen and $chuster

/ogistic systems, containing the essential elements of !roliferation, death and com!etition were long recognized as a "ery com!elling re!resentation of a wide range of systems# Elliott )# *ontroll, one of the fathers of statistical mechanics, wrote a book dedicated to this subject and stated4 almost all the social phenomena, e'cept in their relati"ely brief abnormal times obey the logistic gro th ,*ontroll, 1<B:2( /ord 8obert *ay of $(ford, former 0resident of the 8oyal Society wrote in .ature4 )I oul% urge that people be intro%uce% to the logistic e*uation early in their e%ucation+ ,ot only in research but also in the e"ery%ay orl% of politics an% economics+- ,*ay, 1<BC2# 'n 1B<:, 3#8# *althus wrote the first e=uation describing the dynamics of a !o!ulation of auto&catalytically !roliferating indi"iduals ,*althus, 1B<:24 d.,t2%dt D rE.,t2 ,12 with its obvious exponential solution .,t2 D .-Eert, where r defines the growth rate# 3his e=uation may re!resent a "ery wide range of !henomena in "arious fields4 !roliferation in biology, beha"ior ado!tion in sociology, ca!ital returns in economics, or !roselytizing in !olitics#

3he im!act of the !rediction of an e(!onential increase in the !o!ulation was so great, that e"erybody breathed with relief when in 1:3: 0#F# Ferhulst offered a way out of it G the logistic e=uation ,Ferhulst, 1:3:24 d.,t2%dt D rE.,t2, 1& .,t2%k2 ,22 where k defines the carrying ca!acity# 3he nonlinear interaction term &rE.2,t2%k may re!resent confrontation o"er limited resources in biology, finite !o!ulation in sociology, com!etition in economics, or limited constituency in !olitics# 9y including this term the solution saturates at a constant asym!totic "alue . H k ,rather than increasing indefinitely2# 3he belief in the logistic e=uation was strong enough already at the beginning of the 2-th century as to e(tend its !remises for more !ractical ,and "ital2 !roblems4 Sir 8onald 8oss wrote a system of differential cou!led e=uations to describe the course of malaria in humans and mos=uito ,8oss, 1<112# 3his model was taken u! by /otka in ,/otka, 1<232 where the system of e=uations generalizing the logistic e=uation was introduced4 dn1,t2%dt D a1En1,t2 & a11En12,t2 & a12En1,t2En2,t2 dn2,t2%dt D a2En2,t2 & a22En22,t2 & a21En2,t2En1,t2 ,32

Fito Foltera ,Foltera, 1<312 ad"ocated inde!endently the use of e=uations in biology and social sciences I@-J and re&deduced the logistic cur"e by reducing the Ferhulst e=uation ,22 to a "ariational !rinci!le that ma(imized a function that he named 6=uality of life7# 1 sim!lified form of ,32, when a11 D a22 D -, is well known as /otka&Foltera !redator&!rey e=uations4 dn1,t2%dt D n1,t2E,a1 & a12En2,t22 dn2,t2%dt D n2,t2E,a2 G a21En1,t22 ,@2

/ater, 8# 1# Fisher ,Fischer, 1<3B2 e(tended e=uation ,22 to s!atial distributed systems and e(!ressed it in terms of !artial differential e=uations4 K.,x,t2% Kt D aE.,x,t2 G bE.2,x,t2 L +EM.,x,t2 ,N2 ?e a!!lied this e=uation to the s!read of a mutant su!erior gene within a !o!ulation and showed that as o!!osed to usual diffusion, the !ro!agation consists of a shar! frontier ,OFisher wa"e72 which ad"ances with constant s!eed# 1 crucial ste! was taken by Eigen and Schuster ,Eigen, 1<B1; Eigen and Schuster, 1<B<2 who generalized the /otka system ,32 of two e=uations for two !o!ulations to an arbitrary number of e=uations and !o!ulations# 3hey used the new system in the study of the +arwinian selection and e"olution in !re&biotic en"ironments# 3hey considered 6=uasi&s!ecies7 of auto&catalytic molecules which can undergo mutations# Each se=uence i self&re!licates at a rate ai and undergoes mutations to other se=uences . at rates ai.# 3he resulting system of e=uation is4 dni,t2%dt D aiEni,t2 L P.jD1 aijEnj,t2 & P.jD1 aijEni G P.jD1 aiijEni,t2Enj,t2 ,C2

%. &iscrete extended logistic s!stems %.1 'he generali(ed ot)a*+oltera ,- +. s!stem Qonsidering a uniform interaction in ,C2, the ,discrete2 generalized /otka&Foltera system was introduced ,Solomon and /e"i, 1<<C; Solomon, 2---; /e"i, /e"i and Solomon, 2---; Solomon and 8ichmond, 2--1a; Solomon and 8ichmond, 2--1b24 wi,tL12 D aiEwi,t2 L REw,t2 S bEw,t2Ewi,t2 ,B2 where w,t2 is the a"erage "alue of the wi,t2As# 't was shown that ,i2 the system has a steady state for the normalized =uantity (i,t2 D wi,t2%w,t2; ,ii2 the steady state distribution of the ( i can be calculated analytically and ,iii2 the fluctuations of the a"erage w,t2 ha"e a wide distribution with a !ower&law tail that is closely connected with the "alue of the steady state distribution# $b"iously, as there is no e(!licit s!ace in this system, one cannot see localization effects# ?owe"er, the fluctuations of the a"erage "alue are enormous but changing around a fi(ed "alue# 3he !ossible inter!retations of such a model are "ery di"erse4 w i,t2 can re!resent ,i2 the annual income of each

indi"idual in the society if income distribution is considered; or ,ii2 the "alue of a s!ecific stock <at the closing time of the market, for e(am!le2 if the stock market is considered# 3hen, the REw,t2 is connected to ,i2 the social benefits one gets from being !art of the society, such as social security, charity and minimum wage; or to ,ii2 correlations among different stocks in the market# 3he a iAs stand for ,i2 the relati"e change between the current year and the !re"ious one; or for ,ii2 the relati"e change between the "alue of the current day and the !re"ious one# Finally, b,w,t2,t2Ewi,t2 re!resents ,i2 the o"erall trend of the society; or ,ii2 the o"erall trend of the market# %.2 'he discrete spatiall! extended logistic s!stem" the /A0 Model1 Since the late <->s the theory of discrete s!atially e(tended logistic systems ,Shnerb et al#, 2---; Shnerb et al#, 2--1; /ouzoun, Solomon, Toldenberg and *azursky, 2--3; /ouzoun, Shnerb and Solomon, 2--B2 was introduced and studied, 'n the sim!lest model, the 619 *odel7, the catalysts dynamics is assumed to be inde!endent of the !roliferating agent dynamics# 3his model turned out to be analytically sol"able by statistical field theory techni=ues and later by branching random walks techni=ues# 3he 619 model7 is the sim!lest model that e(!lains the emergence and sur"i"al of ada!ti"e s!atio&tem!oral collecti"e objects in terms of the rare e"ents connected with the fortuitous "ariations of the s!atial distribution of growth factors# 3he 619 *odel7 is actually a reaction&diffusion system which has two ty!es of agents4 catalyst agents 1 and !roliferating agents 9 ,5aari, Stauffer and Solomon, 2--<2# 't is a discrete system, both in s!ace and in the fields it describes ,1 and 9 in any s!atial !oint are natural numbers, ne"er negati"e2 and as such needs to be described with a set of rate e=uations# 3hen the agents may go through the following two !ossible !rocesses with the corres!onding rates4 ,i2 +iffusion4 at each time ste!, with !robabilities + a%2d and +b%2d, res!ecti"ely, an 1 or 9 mo"es to one of the nearest neighbour site on a d&dimensional lattice; ,ii2 8eaction4 at each ste!, with !robabilities U and VE .1, a single 9 dies or gi"es birth to a new 9, res!ecti"ely, where .1 is the number of 1As in the same location# 1 ne"er die or get born # .ai"ely, this system can be ma!!ed into two !artial differential e=uations4 K9,x,t2% Kt D +bEM9,x,t2 L ,VE1,x,t2 S U2 E 9,x,t2 K1,x,t2% Kt D +aEM1,x,t2 't is tem!ting to say that we can sol"e e=uation ,<2 to get4 1,x,t2 H n1 ,1-2 in long times and then to !lug it into e=uation ,:2 to say that de!ending on the !arameter m D ,n1EV S U2 the total number of 9As will either increase e(!onentially ,if m W -2 ore decrease e(!onentially ,if m X -2# 't turns out that this 6mean&field7 treatment is totally wrong and as was shown in ,Shnerb et al#, 2---2 in low enough dimensions the 9As will asym!totically increase e(!onentially no matter what the rest of the !arameters areY 3he intuiti"e e(!lanation for this sur!rising result is that the 9As somehow ada!t themsel"es to be localized around regions with good conditions ,large number .1As of 12 3he B !o!ulation sur"i"es because its s!atial distribution turns out to ada!t s!ontaneously to the fluctuations of the catalysts density# 3his is an emergent ,not 6!ut by hand72 !ro!erty of the B !o!ulation in s!ite of the fact that the indi"idual B com!osing it do not !osses such a !ro!erty# +ue to this "ery sur!rising !ro!erty, the model has been e(!lored in great detail using analytical field theoretical techni=ues, numerical simulations and strong cou!ling analysis# 't turns out that for % Z 2, the system e(hibits an acti"e !hase at any growth rate at the continuum limit# For % W 2 there is a kinetic !hase transition at some !ositi"e m( 'n fact the condition for sur"i"al is V % + 1 W 1&0d where 0d is the 0olya constant in d&dimensions# For dD1 and dD2, 0dD 1 and there is no condition# 'n the last 1- years, many theoretical, com!uter e(!erimental and em!irical bits of understanding on this issue were gathered# 3his knowledge turned out to constitute a conce!tual framework that a!!lies to many biological, cogniti"e and socio&economic systems# 'n the !resent !a!er we limit oursel"es to economic a!!lications# 'n this framework, one in!uts some of the most fundamental socio&economic 6microsco!ic7 dynamical facts and obtains as an out!ut se"eral of the well known economic macrosco!ic !atterns# 'n the ne(t section we !resent a few e(am!les of such !atterns that the model !redicts under a unified conce!tual !aradigm# ,:2 ,<2

2. Appl!ing the /A0 Model1 to economic s!stems 2.1 ocali(ed high activit! sectors% regions that dri"e the growth of the entire system# 1s was shown in ,Shnerb et al#, 2---2 the system ,self2&organizes itself in islands&like structures# 3hese islands ha"e strong ada!ti"e !ro!erties and are much more efficient in e(!loiting the a"ailable resources, as a result the system can sur"i"e and e"entually reaches a steady growth ,see islands growth in se=uence of sna!shots at the u!!er !anel of figure 12 e"en when the a"erage %continuity a!!ro(imations would !redict total e(tinction# 3his result has been rigorously !ro"ed both by field theory techni=ues ,see renormalization grou! flow diagram in figure 12 ,Shnerb et al#, 2---2 and by branching random walk !roofs by mathematicians ,Sidora"icius and [esten, 2--32#
3igure 1" /he )0B $o%el-& %iscrete stochastic spatially e'ten%e% logistic system1 the 02s are the catalysts that ma3e the con%itions for the reactants B2s to gro ( Both types of agents 40 an% B5 come in %iscrete *uantities 46,1,2,3,((5( 7ne can see in the upper panel that the B2s self arrange% in an islan%s li3e spatial structure( /he lo er panel is the flo chart of the renormali8ation group calculation1 the main result is that in lo enough %imensions 4t o or less5, regar%less of the other parameters of the problem 4%iffusion rates, birth an% %eath rates5, the B2s population ill gro asymptotically pro"i%e% that the lattice is big enough( 7r as as ritten in the title of the paper1 )9ife al ays in on the surface:-

2.2 -lobali(ation leads to instabilit!. 'n ,/ouzoun et al# 2--32 it was shown that when the com!etition between different agents is of long range, the system e(hibits wide ine=ualities between s!atial regions, sectors, indi"iduals# 't was also !redicted that globalization would lead to large fractal tem!oral fluctuations and to systemic instability and crisis# .eedless to mention the rele"ance of this study to the current crisis# 'n fact the le"el of aggregation that is o!timal for a gi"en system has been com!uted4 a too short interaction ,com!etition2 radius leads to a stable but low intensity economy that does not e(!loit efficiently the "arious o!!ortunities and does not transfer efficiently acti"ity form the !laces that became disad"antageous ,the gray line at the bottom of figure 22# $n the other hand, in the systems which are com!letely globalized, the acti"ity is com!letely localized in one contiguous island ,sna!shots in figure 22 and its colla!se results in the colla!se of the system as a whole# 1s a conse=uence, the system has an o!timal number of islands that ensures it>s growth while minimizes its fluctuations#
3igure 2" /he same type of mo%el as in Figure 1 4the )0B $o%el-5( In this instance, the effects of %ifferent ranges of competition 4the saturation term of ;erhulst5 ha been stu%ie%( /he grey line correspon%s to local competition, the blac3 one has a ra%ius of competition of 16 4in 166'166 lattice5 an% the blue line stan%s for )infinite- ra%ius of competition 4globali8ation5( 7ne sees the %ramatic effect of this parameter on the stability of the system1 the fluctuations get bigger an% bigger( /he three insets are snapshots of the case ith infinite ra%ius of competition1 one sees ho e"entually all the acti"ity remains in one islan%( 0s a conse*uence each change in the lea%ing islan% lea%s to macroscopic catastrophes

2.% -rowth alignment effect ,T1E2# 'n +o"er et al# ,2--<2 and 5aari et al#,2--:2, in "arious discrete s!atially e(tended logistic systems ,at "arious aggregation le"els2, clusters of agents who share the same growth rate were found# 'n figure 3 ,+o"er et al#, 2--<2, the !rediction of the e=ualization of growth rate is shown and tested "ersus world data from "arious countries# $ne can obser"e clusters of countries that share the same growth rates regardless of the absolute "alue of income ,or T+02 !er ca!ita similar to the theoretical !rediction coming from the model# \nlike the usual neoclassical theories of growth con"ergence ,]&con"ergence2 T1E im!lies only the e=ualization , alignment 2 of the growth rates, not of the absolute "alues of the economic =uantities# 3his sa"es the ages&long debate whether con"ergence is a real effect#
3igure %" Real <=Ps 4in units of 1>>6 !? %ollars5 for the years 1>@A 2.2 B 2663, of the 12 European countries an% the Real <=Ps of ?pain, <reece an% Portugal( 7ne sees that although these three countries strengthen their economic connections ith the rest of the European countries since the 1>C62s, their <=P %i%n2t approach the "alue of the rest of Europe but rather their gro th rate became aligne% ith the a"erage rate of the rest of Europe(

2.2 4*curve effect. 5aari et al#, 2--: ha"e used a com!act minimal "ersion of the renormalization grou! results ,figure 12 of the generic 619 *odel7 to re!roduce a "ery fundamental economic macrosco!ic !attern that follows generically major shocks % crises# 3he result of the shock ,e"en of beneficial reforms2 is always an initial decline that is followed by an u!turn# \nlike the usual macroeconomics e(!lanations ,adjustment, etc2, in this model the effect is due to the in&homogeneity of the microsco!ic elements4 3he main idea is that following dramatic e"ents, large sectors !re"iously dominating the economy start fading away while !re"iously unde"elo!ed sectors take o"er# Trou!ing all the growing sectors on the one hand and all the fading ones on the other hand, the recession&reco"ery !rocess is then com!letely determined by the "alue of the returns for the two aggregate sectors and the transfer rate of economic acti"ity between them ,figure @ e(em!lifies it in the case of 0ortugal2# 3his understanding was e(!loited in order to find an o!timal dynamic schedule for the effecti"e transfer rate between the fading and the taking&o"er sectors# 'n figure C1 one sees the effects of different inter"ention !olicies# Following the theoretical !redictions of the minimalist model which says that after an e(ternal shock the o"erall acti"ity of the system will follow a ^&sha!e, the T+0 data of all countries in the last N- years was studied em!irically# 't turned out that using only 3 !arameters ,Y2 it was !ossible to fit all the cases identified to e(hibit an e(ternal shock# 3he 3 !arameters were shown to be related to the res!ecti"e growth rates of the former and future leading sectors and to the interaction between them ,Fig# N2, ,+o"er et al#, 2--<2# Furthermore, this model allows one to both detect shocks ,which can stand for laws%regime changes or wars2 by looking at the countries T+0 and to make =uantitati"e !redictions as for what will be the de!th of the crisis, when will the economy start to grow again, when will it e=ualize the initial "alue and how one can o!timize the !rocess# 3igure 2" E'ample of the #&shape of <ro th Rate of Economic sectors
ithin Portugal %uring the 1>C6Ds an% 1>E6Ds( /he t o soli% lines represent ;alue 0%%e% 4e*ui"alent to sectorial <=P5 of the aggregations of the sectors into t o groups, group 0 contains Construction, Retail, /ransport, Communications an% Finance an% <roup B contains Hotels, Restaurants, ?er"ices, Health, E%ucation an% Public a%ministration( /he crossing 4s itch bet een %ominating groups of sectors5 happens at aroun% 1>CA as is also e"i%ent in PortugalDs real <=P per capita 4blue line5 here the #&cur"e can be seen(

3igure 5: /he left panel sho s the results of the minimalistic "ersion of the mo%el that consists of three parameters only(
/he toy mo%el as use% in or%er to %emonstrate it2s ability to ser"e as a tool for policy ma3ers1 the total economic output is plotte% "ersus time for "arious "alues of the transfer rate 4G5 bet een the %ifferent parts of the economy( /he right panel sho s se"eral empirical #&cur"es an% their impressi"e fits ith the assistance of three parameters only( In principal, one can pre%ict in %ifferent stages of the process the resulting outcome1 hat ill be the asymptotic gro th rateH Ihen ill the economy reco"er its initial "alueH

2.5 6ost*liberali(ation 6olish econom!. 3he fall of the iron curtain was a uni=ue e"ent, which has !ro"ided a great o!!ortunity to study a socio&economic system across ra!id transition between socialist regimes and the free market regime ,6shock thera!y72# \sing a data set which includes yearly data of the _3--- counties of 0oland for more than 1N years, 5aari et al# ,2--:2 were able to demonstrate many of the theoretical !redictions of the 619 model7# 3hey ha"e shown that growth is led by few singular growth centers ,figure C2, that initially de"elo!ed at a tremendous rate, followed by a diffusion !rocess to the rest of the country and leading to a !ositi"e growth rate uniform across the counties# 3he "ery wide differences in the economic acti"ity !er ca!ita of the counties !ersisted in the form of a fat&tailed distribution of economic acti"ity in s!ite of the alignment of their growth rates ,figure B92# 1n interesting finding was the role of education in economic de"elo!ment4 3he analysis shows that the countiesA economic acti"ity after the liberalization de!end strongly on the education distribution ,generated by the socialist regime2 before liberalization ,but .$3 on the economic acti"ity then2#

3igure 8" /he figure represents the autocatalytic gro th of the Polish economy after liberali8ation 4in the years 1>E>, 1>>F, 266F respecti"ely from left to right5( 7ne can see that rather than a uniform e"olution, the %ynamics is %ri"en by a fe singular locations(

5. Conclusions and future vision 3he introduction of agent based models in social sciences was a bold mo"e forced u!on us by the reality that 3igure 7" /he figure abo"e sho s the time e"olution of the number of enterprises per capita in "arious counties 4aggregate%
by their e%ucation le"el5( 40, B5 are empirical %ata hile 4C, =5 are mo%el pre%ictions( 405 /he time e"olution of the counties gro th rates( /he %ata are aggregate% accor%ing to the a"erage e%ucation le"el in inter"als of 6(A e%ucation years per capita( /he first point, correspon%ing to the gro th bet een 1>E> an% 1>>6 is largely representati"e for the communist regime since the Balcero ic8 reform as intro%uce% in 1>>6( /hen, imme%iately after the liberali8ation the gro th rates of the %ifferent counties %i"erge% strongly1 in the gro th centers, the economic acti"ity more then triple% hile in most other counties it hal"e%( 9ater on, the gro th rates of all the counties became similar( ,e"ertheless, the ine*uality bet een the gro th centers an% the rest of the counties continue% to increase e'ponentially 4the scale in this panel is 9in&log5( 4C5 an% 4=5 represent the same effects as generate% by the theoretical mo%el( 7ne can see the agreement bet een the %ifferent parts 4theory an% reality5(

the actual objects underlying social dynamics are indi"iduals and their acts rather then continuous ,s!ace&2 time functions go"erned by ,!artial&2 differential e=uations# 3his =uantum jum! was not without !erils4 the dynamical stability of a bunch of discrete entities go"erned by discrete interactions is more difficult to establish than the /ya!uno" e(!onent of time e"olution of differential systems# 'n fact it was found that in the !resence of autocatalytic interactions, not only the numerical stability of such systems is in =uestion but rather the actual dynamical stability of the real systems dis!lays strong irregularities and intermittencies# 8ather then an un!leasant nuisance, this singular beha"ior is the "ery root of the com!le( dynamics that makes !ossible stable human organizations, resilient economies and sustainable growth# 3he am!lification of certain indi"idual e"ents to systemic self&sustaining changes is not the noise but rather the signal# 3he studies re"iewed in this article sum u! to a baseline that !ro"ides the basis to the ne(t =uantum jum!# *ore !recisely one is lead to the conclusion that the generic criterion that se!arate !henomena doomed to remain local and buried in the noise from the ones destined to take o"er the system is auto&catalysis# 'n order to understand, !redict and steer systemic changes one has to disco"er, identify and characterize the feed&back loo!s that sustain and am!lify them# $ur !re"ious studies ha"e identified a wide range of such mechanisms bridging o"er the many scales from the indi"idual to the systemic le"el# E(am!les of such autocatalytic mechanisms are contagion between interacting neighbors ,or business !artners2, !roliferation ,of successful entities under a!!ro!riate conditions2, generation by such entities of the "ery conditions that !roduce them ,or makes them grow2, interactions between "arious aggregation le"els within the system ,indi"idual e"ents contributing to the general mood that encourage their further emergence2 etc# 3he disco"ery, "alidation and !ractical use of those autocatalytic loo!s can be fully achie"ed only by a future intimate dialogue between the em!irical studies and the theoretical ones ,with significant assistance from the com!utational and numerical a!!roaches2#

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