ECONOMIC NETWORKS: WHAT DO WE KNOW AND WHAT DO WE NEED TO KNOW?

Abstract

We examine the emergent field of economic networks and explore its ability to shed light on the global and volatile economy where credit, ownership, innovation, investment, and virtually every other economic activity is carried at a scale and scope that respects no geographical, organizational, or political boundaries. In this context, the study of economic networks and their dynamics must reflect the vast complexity of the interaction patterns and integrate it with a realistic account of the incentives and information that govern agents' behavior. The interplay of both has been shown to produce metastabilities, system crashes, and emergent structures in ways that are yet only poorly understood. Meeting this exciting scientific challenge requires a combination of time-series analysis, complexity theory, and simulation with the analytical tools that have been developed by game theory, as well as graph and matrix theories. We argue that this will help achieving a better integration of theory and data models and provide a better understanding of the potentials and risks of modern economic systems.