LOS ANGELES — Economists are learning about the workings of the financial world by studying packs of wolves and schools of fish. That's according to Simon Levin, a Princeton University scientist and winner of this year's Tyler Prize for Environmental Achievement. Professor Levin has been honored in Los Angeles for his work at the intersection of biology and business.
Simon Levin is a trained mathematician who uses math to study biological systems. He says individuals in groups show similar behavior, whether they're wolves in the wild or traders on Wall Street.
“Individuals are competing for limited resources, enter into cooperative arrangements, exploitative arrangements, parasitic arrangements, so they really are the same sort of phenomena," Levin said. "So with some colleagues, I began looking at economic systems two decades ago.
In early 2008, Levin co-authored an article called “Ecology for Bankers” in the journal Nature, accurately predicting the financial collapse sparked by the problems in the housing mortgage market. He says the complex financial and banking systems were showing signs of strain that, in the world of biology, would signal a coming crisis.
“The systems were becoming more and more interconnected, and when ecological systems become so interconnected, they run the risk of collapse," he said.
He is now turning his attention to threats in the natural world as the oceans and climate systems face increasing strains caused by human activity.
“So we study fish schools, we study bird flocks. Of course, we study groups of animals like wolves or wildebeest to understand how they are organized and to understand how they’ve dealt with the problems of collectives," said Levin.
Levin says complex systems need resilient responses to cope with emerging threats, and that is a challenge in our interconnected world, where global links create added stresses on fragile organizations.
“So we need a system that first of all has generalized responses that buy us time and secondly has adaptive responses specific to the particular threats. I think that's how we have to be dealing with threats to our society, whether it's to the financial system or bioterrorism," he said.
Levin says there are no easy answers as we cope with threats in complex global systems, from climate change to financial crisis, but he says we humans have an advantage over our animal cousins because we can study the risks and devise effective responses.