power laws

Not the keyword you're looking for? See all keywords.

Sandpiles and Crashes: How Systems Tune Themselves to the Brink Sandpiles and Crashes: How Systems Tune Themselves to the Brink
11 min read Keywords:  self-organized criticality, sandpile model, Per Bak, power laws, avalanches, Bouchaud, efficiency, fat tails, crashes

The last essay left a loose end. Markets sit at a critical edge where small shocks cascade, but critical points are finely tuned, so who keeps a market balanced there? The answer, found in a pile of sand, is that nobody does. Some systems walk to the brink on their own, and that is where their crashes come from.