Principal Investigator: Professor Franck Portier

Franck Portier

Franck Portier is Professor of Macroeconomics at University College London, Senior Member of the Institut Universitaire de France and Research affiliate at CEPR. His primary research field is the theory and empirics of business cycles. In particular, he has been working intensively on the macroeconomic impact of changes in perceptions about the future. Franck Portier obtained his Ph.D. from Université Paris I Panthéon-Sorbonne and previously held positions at the Toulouse School of Economics and CREST.


The main challenge facing macroeconomics is to understand how a large set of decentralized decisions interact to create aggregate outcomes characterized by booms, busts, recessions, periods of exuberance and periods of despair.

At an individual level, the decisions people take generally make sense and are most often directed at improving and stabilizing one’s own situation. If an individual were to be secluded on an island, it is unlikely he/she would take decisions which would endogenously induce boom and bust cycles. The only reason there would be boom-bust cycles on a self-sufficient farm is if nature imposed busts through droughts and the such. However, in a modern economy, boom-bust cycles are recurrent even in the absence of shocks brought by nature.

Why and when do reasonable individual-level decisions aggregate to produce economy-wide outcomes that have characteristics distinct from the goals driving the initial decisions? A classic example of this is the paradox of thrift popularised by Keynes, whereby an increased desire to save at the individual level may lead to an aggregate situation where everyone achieves lower savings. More generally, the idea that aggregate outcomes have properties very different from individual-level decisions is referred to in the system theory literature as emergent phenomena. Emergent structures can be found in many natural phenomena: hurricanes emerge from a mutual positive feedback between wind, humidity, evaporation of warm surface waters and Coriolis effects. Swarm behaviour of marching locusts, schooling fish and flocking birds are famous natural life examples of emergent phenomena.

There has been little effort in economics at understanding emergent phenomena in a systematic way. The existence of a two-way feedback between microstructure and macrostructure has been recognised for a very long time, from the invisible hand of Adam Smith to the work of Hayek and Schelling. There are many examples where aggregate outcomes may display instability when individual-level decisions are aimed at favouring stability, but it is unclear what are the key forces driving such phenomena.

Studying economic emergent phenomena is somewhat different than in other fields for two reasons. First, the decisions units are not simply governed by habit or genes. Economic decision-makers are constantly trying to understand the system in which they live and try to take decisions accordingly. Second, these agents are often forward-looking, taking decisions that reflect how they think their environment may evolve over time. Both these characteristics give constraints on behaviour that are generally not present in the main body studying emergent phenomena.

Understanding emergent phenomena in a systematic way is crucial if we want to stabilize the economy and produce better macroeconomic outcomes. Only a systemic understanding of what may cause instability will allow to specify well-targeted policies. A systematic study of emergent phenomena — where the emergent behaviour could take different forms such as hysteresis, limit cycles or chaos– will give us a way to better to direct our empirical exploration as to both find what type of instability may be most prevalent at the macroeconomic level and what type of microeconomic phenomena may best explains it.


Results will be published here when available.