Proving the existence of speculative financial bubbles even a posteriori has proven exceedingly difficult so anticipating a speculative bubble ex ante would at first seem an impossible task. Still as illustrated by the recent turmoil in financial mar
kets initiated by the so called subprime crisis there is clearly an urgent need for new tools in our understanding and handling of financial speculative bubbles. In contrast to periods of fast growth, the nature of market dynamics profoundly changes during speculative bubbles where self contained strategies often leads to unconditional buying. A critical question is therefore whether such a signature can be quantified, and if so, used in the understanding of what are the sufficient and necessary conditions in the creation of a speculative bubble. Here we show a new technique, based on agent based simulations, gives a robust measure of detachment of trading choices created by feedback, and predicts the onset of speculative bubbles in experiments with human subjects. We use trading data obtained from experiments with humans as input to computer simulations of artificial agents that use adaptive strategies defined from game theory....
P.W. Anderson proposed the concept of complexity in order to describe the emergence and growth of macroscopic collective patterns out of the simple interactions of many microscopic agents. In the physical sciences this paradigm was implemented system
atically and confirmed repeatedly by successful confrontation with reality. In the social sciences however, the possibilities to stage experiments to validate it are limited. During the 90s a series of dramatic political and economic events have provided the opportunity to do so. We exploit the resulting empirical evidence to validate a simple agent based alternative to the classical logistic dynamics. The post-liberalization empirical data from Poland confirm the theoretical prediction that the dynamics is dominated by singular rare events which insure the resilience and adaptability of the system. We have shown that growth is led by few singular growth centers (Figure 1), that initially developed at a tremendous rate (Figure3), followed by a diffusion process to the rest of the country and leading to a positive growth rate uniform across the counties. In addition to the interdisciplinary unifying potential of our generic formal approach, the present work reveals the strong causal ties between the softer social conditions and their hard economic consequences.
