Scientists Discover New Equation To Predict Future Disasters — From Financial Crashes To Brain Seizures
Someday, we may be able to anticipate disasters like the 2008 financial collapse and correct them before they happen.
Scientists in the United Kingdom and Australia say they've developed an equation that reads the way information flows through complex systems, like financial markets or human neurons. By understanding the "tipping point" before the disaster, the researchers are convinced they can someday predict "calamitous events before they happen."
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These findings appeared in the journal Physical Review Letters last week. Neuroscientists at the University of Sussex and Charles Sturt University in Australia said their research was geared toward understanding health problems, such as brain seizures. They were trying to understand more about how the diseased and healthy brain works.
But they say the research has far broader implications than just neuroscience.
"The key insight in the paper is that the dynamics of complex systems — like the brain and the economy — depend on how their elements causally influence each other; in other words, how information flows between them," said lead researcher Lionel Barrett in announcing the article.
Each unit in a system, like neurons in the brain, interacts both on its own and as a result of information streaming in from the other units around it. And it's not random; this information flow can be predicted using mathematics and computer models, according to the new research. The scientists showed that when considered as a whole, the system reveals what are called "phase transitions" — in this case, the moment when the system moves from healthy to unhealthy, bull or bear.
Basically, what they found is that information flow is greatest just before the turn.
"The implications of the work are far-reaching. If the results generalise to other real-world systems, we might have ways of predicting calamitous events before they happen, which would open the possibility for intervention to prevent the transition from occurring," says Anil Seth, professor at the University of Sussex. "For example, the ability to predict the imminent onset of an epileptic seizure could allow a rapid medical intervention (perhaps via brain stimulation) which would change the course of the dynamics and prevent the seizure. And if similar principles apply to financial markets, climate systems, and even immune systems, similar interventions might be possible."
A lot of the research grows out of something called the Ising Model. Ernst Ising, the physicist namesake, was looking at the way magnets interact. But the same principles can be applied to neuroscience and social science. It's a way to reduce extremely complex real-world systems into much simpler and easier-to-study models.
No word yet from Wall Street or the Fed about adopting the crystal ball equation as a policy tool. Although the researchers are confident in the broad applicability of their model, Seth says they aren't there yet.
"Further research is needed to explore these exciting possibilities," Seth said.
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