Video: Tulipomania, Collective Effects, & Complex Adaptive Systems
Excerpts (Via Nigel Goldenfeld)
The important thing is that when there is enough connectivity, the network becomes alive! It starts to forget what it is made of, and behaves according to new rules: as long as there is enough money floating around, everyone plays a game where they buy a tulip, and sell it at a higher price. It doesn’t matter how much they paid for it, because in a large network, you can always find someone who will pay more for it than you did. And so the price of tulips just keeps getting higher and higher. According to one estimate, by 1637, the best tulips were worth about $76,000 in today’s money.
On Complex Systems:
The new rules of the network are the outcome of the activity of all the people in the network. This dynamic is called a Collective Effect, because it relies on there being lots of players, all of whom are behaving in a way determined by the other players. We can’t predict what any one person is going to behave like, but the behavior of the group is predictable and follows reasonably well-understood rules.