JAFEE20: INTERNATIONAL CONFERENCE ON SOCIO-ECONOMIC SYSTEMS WITH ICT AND NETWORKS
PROGRAM FOR SUNDAY, MARCH 27TH
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10:00-12:00 Session 6: Invited Talks (3)

Invited Talk (3)

Location: Room A
10:00
Agent‐Based Modeling as a Foundation of Big Data
SPEAKER: Shu Heng Chen

ABSTRACT. TBA

10:30
Mean Field Theory of Default Cascades in Credit Networks

ABSTRACT. TBA

11:00
Complex Network Approach to Understanding the Relationship Between Social Media, News, and Global Financial Market Returns

ABSTRACT. We analyze the network structure of lagged correlations among daily financial news sentiments and returns of financial market indices of 40 countries from 2002 to 2012. Using a spectral method, we decompose the network into bipartite sub-structures, and show that these sub-structures are relevant to the performance of prediction models, bridging concepts from network theory and time series analysis. Our results suggest that, at the daily level, endogenous influences among financial markets overwhelm exogenous influences of news outlets, and that changes in financial news sentiments respond to market movements more substantially than they drive them.

Keywords: News sentiments; time-series analysis; logistic regression; singular-value decomposition.

 

11:30
Dark tourism : Guided tours for refugees
12:00-13:30Lunch
13:30-14:30 Session 7: JAFEE Presidential Lecture
Location: Room 1
13:30
Systemic risks in Evolution and I/O Network Analysis
SPEAKER: Yuji Aruka
14:40-15:10 Session 8: Invited Talks (4)

Invited Talk (4)

Location: Room A
14:40
The Complex Roots of Economic Liberalism
SPEAKER: Alan Kirman

ABSTRACT. Abstract

 

Economic theory has developed in such a way as to be consistent with the socio-political liberalism which became dominant after the Enlightement. The doctrine of "laissez faire", and the argument that leaving people insofar as possible to their own devices would lead to a socially desirable state was based on the conviction that an Invisible Hand would lead society to such a state. As economic theory developed it was never able to give a formal justification for this assertion. It was claimed that this would happen but the discipline was confined to study the welfare properties of equilibrium states without explaining how they were attained. Thus crises were said to be generated by exogenous shocks and did not come from within the system. Changing our two hundred year old paradigm to thinking of the economy as a complex adaptive system allows us to consider economies out of equilibrium and the fact that they may self organise into states which are far from optimal. Such systems with their feedbacks are unpredictable and policy measures can generate unexpected consequences. Accepting this may lead to more realistic and more modest economic theory.

15:10-15:20Break
15:20-16:35 Session 9A: Complex Systems and Complex Networks (1)

Complex systems and complex networks (1)

Location: Room A
15:20
New framework for default probability with a scale free cascading networks
SPEAKER: unknown

ABSTRACT. In our presentation, we are going to propose new framework for estimating firm’s default probability (PD). Also, we introduce the important results from our simulation of firm’s network based on Watts’s cascading model. In short, our PD framework is mainly composed of two parts. One is internal PD which is based on Merton model, usually used in financial institutions, and the other one is external PD which is new additive component. Generally speaking, firms are belonging to many kinds (size, strength, area, business sector, etc.) of networks and are not existing solely. This implies that firms are connected to each other. In these networks, some firm’s positive or negative shocks are diversified. Additionally, fatal failures like default are cascaded and infected to neighbors. Namely, we need to consider not only firm’s internal risk but also external risk to estimate firm’s PDs correctly. Our framework can be regarded as the natural expansion and reflection of this phenomenon. For external parts, firm’s network plays an import role. The external parts will be small for firms in the weak linked networks and will be large for firms in the tightly linked networks. Timely updated networks are necessary for external part, but it’s impossible to obtain due to data limitation. Then, we simulated the firm’s multi layered cascade model by applying Watts’s cascade model and Merton model in consideration of the correlations, drifts, and volatilities from historical stock prices and financial reports. We suppose several networks like random network, scale free networks, etc. In our presentation, we introduce the example of the financial institution’s network and show examples of internal and external PDs.

15:45
Managing Knowledge Development and Transfer in Complex New Product Development Projects
SPEAKER: unknown

ABSTRACT. As New Product Development is a dynamic organizational process that expands a firm's knowledge scope, Knowledge Development and Transfer (KDT) is an important aspect of NPD. Despite this fact, KDT in NPD projects has received little attention in the current literature. To address this shortcoming, we conceptualize NPD as collective organizational problem solving where teams of agents engage in solving interrelated subproblems (i.e. design of product subsystems). Then, we develop an agent-base model (ABM) by using the well-studied NK landscape model to investigate the macro performance consequences of different micro KDT resource allocation and KDT temporal dynamic strategies. In particular, over NPD process, designers/agents involve in either knowledge development or transfer activities. While the former can be impacted by KDT resource allocation, the latter depends only on the network interaction of designers. Moreover, the interaction intensity of the subsystem being developed by the designers also affects the performance consequences of these KDT activities. The results of our experiments determine the optimal KDT strategies for different NPD features (e.g. architectural features, design problem complexity).

16:10
Reconstruction of International Trade Network
SPEAKER: unknown

ABSTRACT. In the era of economic globalization, most of national economies are linked by international trade and consequently forms a global economic complex network. It is expected that higher economic growth is achievable by free trade based on the establishment of Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA). On the other hand, we observed various kinds of collective motions for economic dynamics, such as synchronization of business cycle, on the giant economic complex network.

However currently available trade data have limitation on its resolution. For instance, UN comtrande records trade amount between bilateral countries for each goods, and the World Input-Output Database records sector-specific trade amount without information of goods. This limited resolution makes it difficult to analyze network structures and effect of reduction of trade tariff and trade barrier systematically.

In this paper, we reconstruct the sector-specific trade network for each goods by maximizing configuration entropy based on the local information of inward and outward trade flow. First we estimate trade cost C_AB^(G) to reproduce trade amount data T_AB^(G) by maximizing configuration entropy with given D_A^(G) and O_A^(G). Next we estimate trade cost C_AαBβ to reproduce trade amount data T_AαBβ by maximizing configuration entropy with given D_Aα and O_Aα. Then we obtain an analytic formulae to calculate trade cost C_AαBβ^(G) using C_AB^(G) and C_AαBβ. The trade cost C_AαBβ^(G) makes it possible to estimate sector-specific trade for each goods T_AαBβ^(G) by maximizing configuration entropy.

T_AαBβ^(G) provides weight of links of the sector-specific trade network for each goods. For the reconstructed international trade network we identify a community structure, which corresponds to economic clusters linked by trades of various goods. In the past analysis of the sector-specific trade network we obtained communities consist of same business sector across countries [1, 2]. We expect to obtain a different understanding for the sector-specific trade network for each goods.

Finally we analyze the effect of reduction of trade tariff and trade barrier. For instance, Trans-Pacific Partnership (TPP) achieves high-level trade liberation in the Asia-Pacific region where shares more than 40% of world GDP. Trade cost is estimated as 170% of price of goods. Its breakdown of transportation cost is 21% and the rest is trade tariff and trade barrier [3]. We estimate weight of links of the sector-specific trade network for each goods using trade cost considering reduction of trade tariff and trade barrier in the Asia-Pacific region. We discuss the effect of reduction of trade tariff and trade barrier on the change of community structure of the international trade network. This will enable to provide better understanding of international trade after the TPP agreement.

[1] Y. Ikeda, H. Aoyama, Y. Sakamoto, “Community Dynamics and Controllability of G7 Global Production Network”, in Signal-Image Technology and Internet-Based Systems (SITIS), 2015, 23-27 Nov. 2015. [2] Y. Ikeda, H. Iyetomi, T. Mizuno, T. Ohnishi, T. Watanabe, “Community Structure and Dynamics of the Industry Sector-Specific International-Trade-Network”, in Signal-Image Technology and Internet-Based Systems (SITIS), 2014, pp.456-461, 23-27 Nov. 2014. doi: 10.1109/SITIS.2014.67 [3] J. E. Anderson and E. van Wincoop, “Trade Costs”, Journal of Economic Literature, Vol. 42, No. 3., pp. 691-751 (2004).

15:20-16:35 Session 9B: Complexity in Economic Systems (1)

Complexity in economic systems (1)

Location: Room B
15:20
Ecosystem Engineering in Natural and Social Systems
SPEAKER: unknown

ABSTRACT. Complex and diverse life forms appeared relatively recently in the geographic history of our planet: 540 million years ago in event know as the Cambrian explosion. Similarly, complexity and diversity of human organisations exploded quite recently in the history of society, beginning with the Industrial Revolution.

In 1994 Jones et al. introduced the concept of ecosystem engineers as organisms that directly or indirectly modulate the availability of resources to other species, by causing physical state change in biotic or abiotic materials, thus creating, modifying and maintaining habitats. While local effects of ecosystems engineers (beavers, for example) are well studied, some biologists claim that ecosystem engineers have profound influence on macroevolution, one of the examples being the triggering of chemical and climatic changes that led to the end of the so called boring billion period, setting off the Cambrian explosion. Therefore, we can argue that ecosystemic engineering is most plausible source of evolutionary innovation that creates spillover effects powerful enough to have major impact on diversity (Erwin, 2008).

In 2012 Acemoğlu and Robinson published “Why Nations Fail”, where they argue that some countries achieve long term economic growth by implementing inclusive institutions, i.e. creating functioning open markets, while others fail to do so because of extractive institutions, where government uses the control to enforce power of selected few. In their book they summarise 15 years of work to explain how some countries moved from extractive to inclusive governments, and how others failed.

We develop an agent based model to explore relationship between agents and resources in two dimensional environment. Giving the ecosystem engineering abilities to the agents, we seek to understand both how ecosystem engineers creates patches in the local environment, and how they change properties of the macro environment.

Furthermore, using North’s (1991) demarcation between institutes and organisations, where institutions are “rules of the game” and they determine what is possible and not possible in the environment; and organisations are group of people that behave within institutional rules to achieve their goals, we use ecosystem engineering thinking to explain how agents can influence phase transition between low-diversity systems with extractive rules to high-diversity systems with inclusive rules.

The main goal of the research is to investigate how presence of the ecosystem engineers in the system affects patch creation, diversity, and macrodynamics, with special focus on ecosystem engineer (and its equivalent in the social system) as innovator and force of endogenous change in the environment. Or to summarise, we seek to explore dynamics of the coevolution between organisms and environment, and between organisations and institutions.

In the conclusion we suggest further development of the simulation in the order to model development of urban areas with organisational clusters as patches in the environment. We aim to develop network dynamics where agents can evolve to forms such as key species, ecosystem engineers, predators and similar.

15:45
Diversity in Cognitive Ability Enlarges Mispricing
SPEAKER: unknown

ABSTRACT. How does known diversity in cognitive ability among market participants influence market outcomes? We investigated this question by first measuring subjects' cognitive ability and categorizing them as `H' type for those above median ability and `L' type for those below median ability. We then constructed three kinds of markets with six traders each: 6H, 6L, and 3H3L. Subjects were informed of their own cognitive type and that of the others in their market. We found heterogeneous markets (3H3L) generated significantly larger mispricing than homogeneous markets (6H or 6L). Thus, known diversity in cognitive ability among market participants impacts mispricing.

16:10
The Behavioral Origins of Aggregate Fluctuations
SPEAKER: unknown

ABSTRACT. In the presence of imperfect information agents may decide to rationally take into account, in their decision process, the actions of other agents because of the information the latter are assumed to reflect. We call the influence on individual decisions resulting from observing other agents observational learning. This paper argues that observational learning aimed at increasing the precision of individual information may lead to aggregate fluctuations. We consider a setting where firms receive independent noisy signals about a common growth rate of demand and can observe other firms’ production decisions through a network of informational links. Our results show that in this environment the case of “isolated” firms, acting only in reaction to their own signal, represents an upper bound for the volatility of individual production in deviation from actual demand. In fact, when firms can observe each other’s decision, they are able to increase the accuracy of their production decisions and reduce distance from actual individual demand. This is quite intuitive as each firm is able in equilibrium to exploit the additional information embedded in other firms’ decision. Moreover, this result is independent on the structure of the network. While reducing volatility at the individual level, observational learning may, on the other hand, lead to an increase in volatility at the aggregate level. In fact, the case of “isolated” firms represents a lower bound for the volatility of aggregate production in deviation from total demand and, according to the properties of the network topology, learning by observing other firms’ decisions can imply a higher variance of aggregate production. In particular, we show that when the all firms in the economy have the same weighted in-degree, i.e., when the sum of the weight of all incoming links is equal for all firms, then the aggregate variance is equal to the case of “isolated” firms. This is due to the fact that in this scenario the influence vector, whose elements measure the influence of the signal received by each firm on aggregate production (Bonacich centrality), is a vector of ones. Any heterogeneity in the elements of the influence vector, corresponding to heterogeneity in firms’ weighted in-degrees, leads to an increase of aggregate variance. Our paper also contributes to the debate on whether the possibility of significant aggregate fluctuations originating at the micro level, i.e., at the firm level, should be discarded in macroeconomics following the argument that in an economy composed by N firms, the volatility of aggregate production should decay at a rate 1/√N. Gabaix (2011) shows that the 1/√N diversification argument does not apply when the firm size distribution is sufficiently fat-tailed, while Acemoglu et al. (2012) show that the argument is not valid in the presence of asymmetric input-output links between sectors. We contribute to this strand of literature by showing that, even in the presence of firms with identical size and without interconnections between different sectors, the diversification argument may not hold in the presence of observational learning. In particular, we show that when the distribution of the elements of the influence vector exhibits fat tails, then aggregate volatility decays at a rate much slower than 1/√N. In other words when many firms look at the decision of the same small number of firms, then the influence exerted by firms that are very central in the informational network does not decay as the number of firms in the economy increases. Finally, we analyze the case of heterogeneous firms’ size and show that, while observational learning reduces individual volatility, the effect on aggregate volatility depends on the interaction between size and centrality of firms in the informational network.

15:20-16:35 Session 9C: Econophysics

Econophysics

Location: Room C
15:20
Stimulation on supply chain network: findings from controllability theory and production and inventory dynamics

ABSTRACT. The financial policy aims at manipulating firms or sectors in order to control, especially, stimulate the economy. Since the policy requires cost, the positive effect should exceed the cost. The effect, at its core, can be evaluated from firms or sectors involved into the stimulation. To infer the effect, macro-economic approaches have been mainly taken, which uses various indices for individual firms or global measures. However, it has been recently shown that the indirect effect, or the ripple effect can greatly vary based the relationships of firms or sectors, i.e. networks. Therefore, we cannot ignore the network to estimate or measure the effect of the financial policy, and the macro-economic approaches cannot grasp the function of the network. The purpose of this talk is to share the possible answers to the following questions by using the firm-level supply-chain network data in Japan. (1) Which sectors are the most effective starting point of the large ripple effect? (2) Which sectors are likely to get involved the ripple effect? (3) If we want to affect not the entire economy but the part of it, is there any effective way to extract the part of the network? We use the controllability theory and the model of production and inventory dynamics.

15:45
Power Law of Market Capitalization during Bubble Periods
SPEAKER: unknown

ABSTRACT. Distribution of firm size based on financial statements in real economy has continually been investigated. The firm size follows a power law function and its index is almost 1 over the last 30 years in various capitalistic countries. In this paper, we focus on the firm size that is measured by market capitalization ($=$ stock price $\times$ number of shares outstanding) in stock markets. Investors estimate daily firm size based on information such as business news and rumor, and quote stock price in the markets. It is also well known that they often follow the market trend made by many investors. In particular, only for the reason the stock price is rising, speculative money concentrates on its stock during bubble periods, and its stock becomes still more expensive. As the result of such preferential attachment mechanism, the upper-tail of firm size distribution grows fat harder in the stock market. We will show the distribution of market capitalization in each of 171 stock markets from 1968 to 2015 in this presentation. The distribution also has a power law. However, the power law index depends on economic condition. The index tends to be larger than 1 before and after bubble periods and to fall smaller than 1 during bubble periods. These results suggest that speculative money concentrates excessively on popular stocks during bubble periods. The difference between firm size in real economy and it in asset economy is often observed by PBR which is defined as market capitalization divided by total book value. The PBR also follow a power law function. The power law index of total book value is stable. Therefore, the power law index of PBR is strongly affected by change of the index of market capitalization, and tends to become smaller during bubble periods.

16:10
Quantized price volatility model for transaction data

ABSTRACT. Financial markets consist of diversifying dynamical systems with many constraints. Price movements can be explained in terms of the size of ticks, the number of trades, and several other constraints. The multiplicity and quantization of price movements are key concepts of the model developed in the present work. The multiplicity provides a bridge between the distribution of ticks and the macro properties of dynamical systems. A basic assumption of the model is that there are no interactions between economic agents; this differs from models that use interactions to explain the anomalous behaviors of markets and asset prices. In addition, this model does not need to assume economic agent rationality. However, the model needs the heterogeneous economic agents who implement the wide variety of trading strategies. This is a fundamental nature of economies and is a driving force behind anomalous behaviors of volatility and price in financial markets. In these settings, the optimized probability distribution of quantized price volatility on a longer time scale might have an exponential form or an power law in real economy and normality in theory. The model provides the view that the fluctuation of number of trades on upward or downward movements in fixed time horizon is ultimate determinant of any anomalous behavior of volatility and price in a financial market on a shorter time scale, and the number of trades makes an equilibrium financial market emerged on a longer time scale.

16:35-16:50Break
16:50-18:05 Session 10A: Complex Systems and Complex Networks (2)

Complex systems and complex networks (2)

Location: Room A
16:50
Revisiting the scale-free discussion: The non-scale-free property of supply networks and the underlying principles
SPEAKER: unknown

ABSTRACT. A vast body of both theoretical and empirical research on complex networks in diverse domain, including biology, mathematics, physics, ecology and social science, has demonstrated the significant link between the structure and functional properties of a given network, and provided many concepts / metrics / methods to quantify the structural properties of networks. Since some network functions such as operational efficiency and robustness / resilience are crucially important for inter-organizational networks, and supply networks in particular, an increasing number of studies has been employing network approaches in order to understand the morphology of supply networks. However, partly due to a lack of large-scale empirical data that captures the overall structure of real-life supply networks, and partly due to a lack of understanding (in management and organizational sciences) of how to deal with the high degree of complexity, the hitherto existing studies have focused intensively on applying simple network archetypal models to represent supply networks. A prime example of such cases is the application of the scale-free property. This property has been identified as one of the common properties of various complex networks, which strongly correlates with the network’s robustness to failure. Many scholars have discussed, and believed without a doubt that supply networks ‘should’ exhibit the scale-free property, on the ground of the universality of the property and real-world cases proving the robustness of supply networks. Are supply networks really scale-free? Surprisingly, this question had not been revisited by anyone – except for the authors: we have revealed the real topology of the Toyota supply network (and the entire Japanese automotive supply network) using large-scale empirical data, and demonstrated the non-existence of the scale-free property of the networks. In this study, we take one more step forward, by further investigating the mechanism of supply network’s non-scale-free formations. We discover the high level of the asymmetry of in-degree and out-degree distributions of the network caused by the ‘roles’ that firms are playing in the industry, resulting in the non-scale-free network. We also demonstrate that the sampling of firms significantly affects the pattern of degree distributions: in the case of the Toyota supply network, the network comprising of the Toyota’s direct supplies is indeed more scale-free. Furthermore, we have successfully identified that other types of inter-firm relationships than supply relationships – such as financial interdependencies and memberships of the same supplier association – help the supply network become scale-free and hence enhance the robustness of the supply network. This study highlights the danger of blindly applying the network views developed based on studies on other types of networks to supply networks, and the importance of taking into account firms’ characteristics in order to make sense of supply network structures.

17:15
Topological properties of the intragenerational occupational mobility network

ABSTRACT. Occupational mobility has been extensively studied in the literature; scholars distinguish between intergenerational (movement within or between occupations, the change occurring from one generation to the next) and intragenerational (movement within or between occupations, the change occurring within an individual's lifetime) occupational mobility. Here I focus on the second type of mobility and explore the occupational mobility patterns of the USA labour force over the last 30 years using network analysis. Yearly networks are constructed considering the occupations as nodes, while the links are weighted with the number of persons experiencing job change in that year. The occupational mobility networks (OMN) are generated using two public databases: Panel Study Income Population (PSID) main family data and Current Population Survey (CPS) March file data. These networks are sparse, with a low network density; exhibit different structure by gender, most of the flows between occupations are bidirectional, there aren’t occupations that disproportionally attract the labor force from the others and the main networks’ characteristics are stable over a long period of time. Considering that the occupations are related to each other via transferable skills, I visualize paths of mobility and calculate network indicators in order to understand models of connectivity between occupations.

17:40
DebtRank Analysis of Financial Distress Propagation on Production Network in Japan

ABSTRACT. Supplier-customer relationship among firms in production network is the arena where financial distress propagates from distressed debtors of customers to its creditors of suppliers. While the events of bankruptcies can be observed easily, the underlying contagion effect of financial distress can have considerable consequences such as chain of bankruptcies.

DebtRank is a model to quantify the propagation of financial distress, which has been recently applied for the analysis and evaluation of systemic risk for interbank contagion. Because the production network in Japan, which comprises more than a million of firms as nodes and millions of supplier-customer relationship as links, is much larger than interbank credit network, it has been a formidable task to study the model of DebtRank on such a large-scale production network.

This work studies the financial distress propagation on the real data of production network by employing an implementation of DebtRank on a supercomputer. By assuming different initial configurations of idiosyncratic shocks on industrial sectors and regions, and the model of distress propagation, we perform the quantification of financial distress, visualize the propagation, and evaluate the resulting ripple effect. The results have an implication of the fact that the present observation of the events of failures or bankruptcies underestimate the amount of financial stress in different parts of the network.

16:50-18:05 Session 10B: Complexity in economic systems (2)

Complexity in economic systems (2)

Location: Room B
16:50
Multilevel Selection and the Emergence of Conditional Cooperation
SPEAKER: unknown

ABSTRACT. We study the emergence of conditional cooperation in the presence of both intra-group and inter-group selection. Individuals play public goods games within their groups using conditional strategies represented as piecewise linear response functions; groups engage in conflicts with a certain probability. In contrast to previous studies, we consider continuous contribution levels and a rich set of conditional strategies, allowing for a wide range of possible interactions between strategies. We find that the existence of conditional strategies makes it possible for cooperation to emerge even with strong intra-group selection.. The strategy that eventually dominates in the population exhibits two properties: (1) It is unexploitable with strong intra-group selection; (2) It can achieve full contribution to outperform other strategies in the inter-group selection. The success of this strategy is robust to initial conditions as well as changes to important parameters. We also investigate the influence of different factors on cooperation levels, including group conflicts, group size, and migration rate. Their effect on cooperation can be attributed to and explained by their influence on the relative strength of intra-group and inter-group selection.

17:15
Slow and rapid recruitment and oscillation period in information cascade experiment
SPEAKER: unknown

ABSTRACT. Kirman's ant colony model is a simple model for recruitment and foraging in ant colonies and for herding in economic systems. Here, we realize the recruitment process as information cascade (rational herding) experimentally and report on the results about the group size r dependence of the oscillatory behavior of collective decision making.

In the experiment, subjects answered a two-choice quiz. At first, all subjects answered with their own knowledge only. Then, they answered sequentially with referring to the previous r subjects' choices. About the referring process, there are two cases. In case I, we gradually increased r as 1,5,11,21, which corresponds to "slow recruitment". In case II, they referred all previous subjects' choices. Case II corresponds to "rapid recruitment".

We study the dynamics of the ratio z of correct choice among r subjects. As r increases, the distribution of z moves rightward and z oscillates around 0.8 for r=21. We study the relaxation time and show it increases with r. The relaxation time saturates to a finite value in case I and the system reaches an equilibrium state. In case II, the relaxation time increases with system size linearly, which suggests that the relaxation time diverges in the infinite system size (thermodynamic) limit. The system is non-self-averaging. In slow recruitment with the slow increase of r, the system converges to the optimal state, where z converges to a large value. Rapid recruitment causes the divergence of the relaxation time and the system can be trapped in sub-optimal state, where z is less that 1/2. These results confirm our previous theoretical predictions.

17:40
Challenges of aging societies to improve healthy life expectancy, to handle the complexities of health, and the potential of information technology
SPEAKER: Kazue Haga

ABSTRACT. This contribution looks at the potential of information technology as a radical innovation for longer employment referring to holistic concepts of innovation. In aging societies, longer productive working is essential to increase productivity, for economies in general, and in particular, for Japan, since immigration remains restricted. To realize this aim, health management is important, since productivity and health are related to each other positively. With extension of the life expectancy, health problems have changed. Chronic diseases are the main issue in health sciences and medicine in developed countries, and the importance of prevention is increasingly recognized. Lifestyle matters at prevention of chronic diseases. For longer working with high productivity and good health condition, work style and lifestyle should be harmonized, such as in the “Blue Zones”, regions of longevity. To achieve this aim, a new approach is required which differs from conventional medical approaches. The concept of Internet of Things is becoming diffused. In addition, products and services by applying ICT (information and communications technologies) such as wearable health-monitoring devices are developing. Though they have still their limits, and their contribution to improve the lifestyle is modest, in particular for evolution in the lifestyle for aging society. Health-monitoring devices or/and sensors are not connected to the activities of medical professions effectively. How to use (big) data created by digitalization efficiently, is a challenging issue. A new concept for handling and usage of data by application of development in ICT as new radical innovation is needed. To harmonize human communication relationships and digital data in health counseling, a new way of communication using digitalized data is required. ICT as support tools can make contributions to develop a new approach for prevention and to manage one’s lifestyle effectively. ICT can make also contributions to change the mindset of individuals about health management. Changing the mindset requires self-evolutionary actions. Evolution in the private life as well as in mindset of employees and employers in order to redesign their work style which is compatible with healthy lifestyle is essential. In addition, ICT should be accepted not only in the cognitive system of individuals but also in the emotional system. This contribution looks at the complexity of individuals and social subsystems and tries to find out why the prevention with keeping a healthy lifestyle is a challenging task for individuals. First, the complexity of individuals is explored based on discussions about complex systems (Luhmann, von Foerster, Maturana & Varela) and applied to the issue of health management, prevention and lifestyle change, which can be considered an evolutionary process. Second, the usability of ICT, in particular for elderly people, is studied. Case studies are conducted, too. Third, the introduction of ICT in medicine for prevention and health coaching is examined. The case study of “Data Health Plan” in Japan should illustrate the challenge at introduction of new innovation (ICT), in particular by focusing on entrepreneurial competences such as imagination, creativity and energy for accomplishment, referring to the holistic innovation concept of CKTS (Convergence of knowledge and technology for the benefit of society). In addition, examples of usage of wearable health-monitoring devices and health monitoring apps should illustrate possibilities and limits of ITC. Furthermore, the development of Big Data is presented, and their potentials and risks are discussed. ICT, Internet of Things, and Big Data could together make a big contribution to create a new effective approach of health management for an aging society. For effective application of ICT and Big Data, deep insights into the complexity of individuals at designing and conducting these technologies is essential.

16:50-18:05 Session 10C: Agent-based Models in Economics and Finance (2)

Agent-based models in economics and finance (2)

Location: Room C
16:50
Information cascade on networks
SPEAKER: unknown

ABSTRACT. In this paper, we discuss a voting model by considering three different kinds of networks: a random graph, the Barab´asi-Albert(BA) model, and a fitness model. A voting model represents the way in which public perceptions are conveyed to voters. Our voting model is constructed by using two types of voters,herders and independents, and two candidates. Independents conduct voting based on their fundamental values; on the other hand, herders base their voting on the number of previous votes. Hence, herders vote for the majority candidates and obtain information relating to previous votes from their networks. We discuss the difference between the phases on which the networks depend. Two kinds of phase transitions, an information cascade transition and a super-normal transition, were identified. The first of these is a transition between a state in which most voters make the correct choices and a state in which most of them are wrong. The second is a transition of convergence speed. The information cascade transition prevails when herder effects are stronger than the super-normal transition. In the BA and fitness models, the critical point of the information cascade transition is the same as that of the random network model. However, the critical point of the super-normal transition disappears when these two models are used. In conclusion, the influence of networks is shown to only affect the convergence speed and not the information cascade transition. We are therefore able to conclude that the influence of hubs on voters’ perceptions is limited.

These models are related to the Watt’s cascade models which are studied recently from the view point of systemic risks. The model with noise is related to Kandori’s evolutionary game models. We will discuss the relation among these models.

17:15
Study on the role of financial markets in an agent-based macroeconomic model
SPEAKER: unknown

ABSTRACT. Financial system is usually thought to be beneficial in improving the efficiency of resource allocation for a modern economy. We do find that the propensities of developed and developing countries are accompanied with the development of strong financial systems. However, we can also find that even a mature financial system can become very emotional sometimes. During such emotional periods, the financial system was not only hurting the direct participants but also impacting the real economy, overfunding or underfunding the firms in need of capital. In this research, we build an agent-based macroeconomic system to study the influence of the financial system. Our macroeconomic system is composed of two parts, one is a minimal model of the economic operations, participated by firms and households; the other is a financial system, consisting of equity financing and debt financing. The first part of the macroeconomic system, the minimal model, can be run independently. This allows us to conduct a thorough study on the properties of the model. Without the financial system, we find that there exists a phase transition between the sustainable economy, characterized by high production, long-term profitability of the firms and wealthy households, and the recession economy, characterized by low production, short-term profitability of the firms and poor households. The phase transition is very robust under the control of the profitability of firms, adjusted by the pricing strategies, and the welfare policy, realized through the dividend payout mechanism. Furthermore, the heterogeneity of firms strongly influences the relaxation path and time towards the equilibrium. In an economy composed of heterogeneous firms, the relaxation near the critical point is featured with more violent fluctuations and longer relaxation time than the one composed of homogeneous firms. The second part of the system is the financial system. The debt financing is realized through a bank agent, who simply transfers the money from the lenders to the borrowers. Besides depositing money in the bank account, the household agents can also manage their wealth by investing in the funds. The fund managers would then construct portfolios considering with the profitability of firms, the movement of the stock price and their private opinions. In the simulation results of the entire macroeconomic system, we find that the financial system accelerates the flows of capital in the minimal model, and indeed improves the efficiency of the resource allocation. We can observe that the firms which are producing products with higher attraction to the consumers would reach high production level faster. However, we also find that the large financial fluctuations, caused by the profit-pursuing behaviors of the fund managers, will trap the economy in recessions. At last, we will test policies, which are tailing certain indicators in the model, to smooth the undesired financial fluctuations.

17:40
Condition for the Validity of Agent-Based Model
SPEAKER: unknown

ABSTRACT. Although agent-based modeling (ABM) is a promising methodology that can deal with heterogeneity, bounded rationality and non-equilibrium dynamics, serious criticism against ABM is pointed out in the literature. One typical criticism by economists is that even though a certain macro phenomenon can be explained by one set of behavioral rules in ABM, there must be many such sets which produce the same result, and therefore no one can recognize the model to be a correct one. It has also been argued that as macro behaviors may be insensitive to many micro variables, it would be difficult to derive the necessary conditions for the model to exhibit specific macro behaviors and therefore any meaningful results cannot substantially obtained from ABM approach. In the present study, condition for the validity of agent-based model is studied taking some of the macroeconomic phenomena as examples of fundamental macro behaviors in a goods market which include business cycles and the changes in GDP caused by an income tax reduction and a corporate tax reduction. A series of simulation experiments are systematically conducted, changing the factors relating to the system structure of the model one by one, and the conditions for the model to reproduce each of the macro phenomena are analyzed. Here, the factors relating to the system structure include the types of agents, the type of field such as the market in which agents develop their activities and the agents’ behavioral rules. As a result, the followings were elucidated. First, in an agent-based model which includes producers’ production and pricing activities, as well as consumers’ buying and working activities, the necessary conditions for the model to reproduce business cycles are the inclusion of bank financing and producers’ capital investment decisions based on demand. This indicates that the credit creation is the most responsible factor in the business cycles phenomenon. Second, in order to reproduce a positive multiplier on income tax reduction under the balanced budget condition, the model must include inefficient government expenditure. Furthermore, in order to reproduce a positive multiplier on corporate tax reduction, it is indispensable that the model include executive compensation, the usage of internal funds for investment, and moderate credit creation, in addition to the inefficiency in government expenditure. These results indicate that the multiplier becomes positive only when the efficiency in expenditure of private sectors is larger than that of government for both income tax reduction and corporate tax reduction. Third, these results indicate that when input conditions in ABM are divided into the system structure and the attribute of the objects included in the system, each of the macro phenomena is sensitive to the system structure and there exists a specific system structure that is indispensable to reproduce each of the macro phenomena. The reason for this is discussed. It is considered that as each of the macro phenomena emerges as a result of agents’ behaviors and their interactions, there could be one to one correspondence between the macro phenomenon, the system structure and its underlined mechanism. Therefore, it is concluded that the system structure is an indispensable condition for the model to qualitatively reproduce a specific macro phenomenon. Moreover, it is considered that an agent-based model that can quantitatively reproduce a specific macro phenomenon can be developed in the future, if a set of the ratios of the attributes is adjusted to be an indispensable one in addition to the system structure, although developing such quantitative model is ambitious and remained as a future subject.

18:05-18:15 Session 11: Closing

Closing Talk

Chair:
Location: Room A