Crises and collective socio-economic phenomena: simple models and challenges

Understand

Financial and economic history is strewn with bubbles and crashes, booms and busts, crises and upheavals of all sorts.

• Understanding the origin of these events is arguably one of the most important problems in economic theory.
• In this paper, we review recent efforts to include heterogeneities and interactions in models of decision.
• We argue that the Random Field Ising model (RFIM) indeed provides a unifying framework to account for many collective socio-economic phenomena that lead to sudden ruptures and crises.