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Why are Economies Unstable?

Welcome to Rebuilding Macroeconomics' Macroeconomic Instability Hub

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Modern macro models are based on the premise that agents will respond to any unforeseen disturbance in such a way that their actions will co-ordinate activity toward the optimal use of resources. The task for policymakers is then merely to reduce economic volatility. This self-stabilising structure appears to be at best questionable in the wake of the Great Recession. In recovery, the spectre of ‘secular stagnation’ has emerged, with no self-correcting mechanism.

We expect scholars to bring insights from sociology, psychology, anthropology and network theory in order to extend our understanding of preferences and decision making, and the implications for stability. Economists may ask how an inherent instability hypothesis can be usefully incorporated into models and used as a guide to policy. Scientists may query whether agent-based models can be revised, so that they may provide better predictions of policy outcomes or more robust policy options in unstable economies. Or perhaps some entirely new approach will emerge that we have not yet foreseen.


Hub Co-Leader: Prof Roger E. A. Farmer

Roger E. A. Farmer is the Co-Leader for Rebuild Macro’s Instability Hub and Research Director at NIESR, London. He is also a Professor of Economics at the University of Warwick in the UK and a Distinguished Professor of Economics at UCLA. Roger is widely known as a world-leading economist and former Senior Houblon-Norman Fellow at the Bank of England. He has published numerous scholarly articles in leading academic journals, as well as books that have been translated into Chinese, Italian, Vietnamese and Hungarian.

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Hub Co-Leader: Jean-Philippe Bouchaud

Jean-Philippe Bouchaud is the Co-Leader for Rebuild Macro’s Instability Hub. After studying at the French Lycée of London, he graduated from the Ecole Normale Supérieure in Paris, where he also obtained his PhD in physics. He was then appointed by the CNRS until 1992. After a year spent in the Cavendish Laboratory (Cambridge), he joined the Service de Physique de l’Etat Condensé (CEA-Saclay), where he worked on the dynamics of glassy systems and on granular media.

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Research Projects

Image by Chris Liverani

Endogenous Extrapolation: Implications for Boom-Bust Cycles and Macroeconomic Policy

A key distinction between economies and physical systems, like the weather, is that economies consist of individuals who form expectations about the fut...

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Principal Investigator:

Michael Hatcher

Image by Markus Spiske

But Why are Economies Stable?

The macroeconomic question: For mathematicians, the puzzle is not why economies are unstable but why they are stable. Since the...

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Principal Investigator:

Professor Robert MacKay, FRS


Macroeconomic Implications of the Sampling Brain

Recent developments in cognitive science have created new models of the moment by moment calculations by which people make decisions....

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Principal Investigator:

Professor Nick Chater

Image by M.T ElGassier

Anxiety, Competing Narratives & the Macroeconomy: What is the Role of Policy in Stabilising Expectations?

This project will focus on examining the conditions under which competing narratives co-exist, influence (and are influenced by) individuals’ emotions... 

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Principal Investigator:

Professor Sayantan Ghosal

Image by Markus Spiske

Macroeconomic Fluctuations as Emergent Behaviour

The main challenge facing macroeconomics is to understand how a large set of decentralized decisions interact to create aggregate outcomes characterized by booms...

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Principal Investigator:

Professor Franck Portier


An Interactions-based Macroeconomic Model

The traditional approach in economics and finance does not model the interactions between people. By taking into account interaction among agents, we may do a better job at capturing source of instability ...


Principal Investigators:

Maxim Gusev & Dimitri Kroujiline

Hub Workshop Recording


Ergodicity: Six Different Viewpoints

The word "ergodicity" is used with apparently different meanings in  different disciplines. The purpose of this meeting is to explore the  connections between the ways people from various disciplines address the  topic.

Jean-Philippe Bouchaud, Physics, Paris     

Juan Garrahan, Physics, Nottingham     

Rosemary Harris, Mathematics, Queen Mary  

Oliver Hulme, Danish Research Centre for Magnetic Resonance and London Mathematical Laboratory    

Anastasia Papavasiliou, Statistics, Warwick     

Mark Pollicott, Mathematics, Warwick

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