On the Potential of the Irreducible Description of Complex Systems for the Modeling of the Global Financial System

TL;DR

This paper proposes a novel irreducible description of complex systems using prime integer relations and self-organization processes, aiming to improve modeling of the global financial system and address limitations revealed by recent crises.

Contribution

It introduces a hierarchical network model based on prime integer relations and an integration principle supported by multi-agent computational experiments, offering a new theoretical framework.

Findings

Hierarchical network model of financial systems

Use of prime integer relations for system description

Potential for a new irreducible theory of complex systems

Abstract

The recent financial crisis has sharply revealed that current understanding of the global financial system is more than limited. In the recovery plan the confidence in the underlying theory is crucial. To address the problem we propose the description of complex systems in terms of self-organization processes of prime integer relations. The description suggests to consider the global financial system through the hierarchical network built by the totality of the self-organization processes. To make the description operational we propose an integration principle and support it by computational experiments using a multi-agent system. Remarkably, based on integers and controlled by arithmetic only the description raises the possibility to develop an irreducible theory of complex systems. These may open a fundamentally new perspective for the modeling of the global financial system.