FORECAST

Using physics to show that instability is as inherent in economic markets as thunderstorms are to the weather, FORECAST introduces exciting research being done where the physical and social sciences overlap.

Picture an early scene from The Wizard of Oz: Dorothy hurries home as a tornado gathers in what was once a clear Kansas sky. Hurriedly, she seeks shelter in the storm cellar under the house, but, finding it locked, takes cover in her bedroom. We all know how that works out for her.
Many investors these days are a bit like Dorothy, putting their faith in something as solid and trustworthy as a house (or, say, real estate). But market disruptions--storms--seem to arrive without warning, leaving us little time to react. Why are we so often blindsided? More to the point: how did Kansas go from blue skies to tornadoes in such a short time?

In this deeply researched and piercingly intelligent book, physicist Mark Buchanan shows how a simple feedback loop can lead to major consequences, the kind predictable by mathematical models but hard for most people to anticipate. Applying a fresh perspective to often intractable problems, Buchanan argues that our basic assumptions about economic markets--that they are for the most part stable, with occasional interruptions--are simply wrong. Markets act much more like the weather: a brief heat wave can become a massive storm in a matter of a few days, or even hours.

Mark Buchanan, a theoretical physicist, is a former editor of Nature and now a columnist for Nature Physics and for Bloomberg News. His previous books include The Social Atom: Why the Rich Get Richer, Cheaters Get Caught and Your Neighbor Usually Looks Like You and Nexus: Small Worlds and the Groundbreaking Theory of Networks. He lives in Notre-Dame-de-Courson, France.