Paul Ormerod

• BA (Cambridge, UK), MPhil (Oxford)
• Professor at University College London

The literature on the fall of civilizations spans from the archaeology of early state societies to the history of the 20th century. Explanations for the fall of civilizations abound, from general extrinsic causes (drought, warfare) to general intrinsic causes (intergroup competition, socioeconomic inequality, collapse of trade networks) and combina...

Urban housing markets, along with markets of other assets, universally exhibit periods of strong price increases followed by sharp corrections. The mechanisms generating such non-linearities are not yet well understood. We develop an agent-based model populated by a large number of heterogeneous households. The agents’ behavioral rules are consiste...

We compare the trajectory of deaths (both in hospitals and care homes) on a daily basis in Sweden and England and Wales (which constitute 90 per cent of the UK population) from 11 March to 12 June 2020, the latest date at which the relevant data is available for England and Wales. Deaths in both Sweden and England and Wales peaked on 8 April. The b...

The Economic Policy Uncertainty index had gained considerable traction with both academics and policy practitioners. Here, we analyse news feed data to construct a simple, general measure of uncertainty in the United States using a highly cited machine learning methodology. Over the period January 1996 through May 2020, we show that the series uneq...

Urban housing markets, along with markets of other assets, universally exhibit periods of strong price increases followed by sharp corrections. The mechanisms generating such non-linearities are not yet well understood. We develop an agent-based model populated by a large number of heterogeneous households. The agents' behavior is compatible with e...

Economists are showing increasing interest in the use of text as an input to economic research. Here, we analyse online text to construct a real time metric of welfare. For purposes of description, we call it the Feel Good Factor (FGF). The particular example used to illustrate the concept is confined to data from the London area, but the methodolo...

Nyman and Ormerod (2017) show that the machine learning technique of random forests has the potential to give early warning of recessions. Applying the approach to a small set of financial variables and replicating as far as possible a genuine ex ante forecasting situation, over the period since 1990 the accuracy of the four-step ahead predictions...

How one builds, checks, validates and interprets a model depends on its 'purpose'. This is true even if the same model code is used for diierent purposes. This means that a model built for one purpose but then used for another needs to be re-justified for the new purpose and this will probably mean it also has to be rechecked , re-validated and may...

Notes are supplied on various species of the Jewel Orchid genus Zeuxine, particularly those taxa found in western Malesia, nearby Thailand, and Cambodia. Narrower circumscriptions are proposed for Z. gracilis and Z. parvifolia, whereas Z. flava is expanded into a broader concept. Zeuxine leucochila is reinstated, and the identities of Z. exilis and...

Abstract From a gene-culture evolutionary perspective, the recent rise in obesity rates around the Developed world is unprecedented; perhaps the most rapid population-scale shift in human phenotype ever to occur. Focusing on the recent rise of obesity and diabetes in the United States, we consider the predictions of human behavioral ecology (HBE) v...

This paper applies algorithmic analysis to financial market text-based data to assess how narratives and sentiment might drive financial system developments. We find changes in emotional content in narratives are highly correlated across data sources and show the formation (and subsequent collapse) of exuberance prior to the global financial crisis...

Between 2011 and 2014 the European Non-Equilibrium Social Science Project (NESS) investigated the place of equilibrium in the social sciences and policy. Orthodox economics is based on an equilibrium view of how the economy functions and does not offer a complete description of how the world operates. However, mainstream economics is not an empty b...

Economic theory has developed a typology of markets which depends upon the number of firms which are present. Much of the literature, however, is set in the context of a given market structure, with the consequences of the structure being explored. Considerably less attention is paid to the process by which any particular structure emerges. In this...

Economics is by no means an empty box. For example, it offers what is possibly the only general law of behaviour in the social sciences, namely that agents react to incentives. Over the past two decades or so, at the micro level, the level of individual agent decision making, the discipline has made progress. Developments in the econometric theory...

Between 2011 and 2014 the European Non-Equilibrium Social Science Project (NESS) investigated the place of equilibrium in the social sciences and policy. Orthodox economics is based on an equilibrium view of how the economy functions and does not offer a complete description of how the world operates. However, mainstream economics is not an empty b...

Even at the beginning of 2008, the economic recession of 2008/09 was not being predicted. The failure to predict recessions is a persistent theme in economic forecasting. The Survey of Professional Forecasters (SPF) provides data on predictions made for the growth of total output, GDP, in the United States for one, two, three and four quarters ahea...

Robert (Bob) Rowthorn has worked throughout his career as a political economist, addressing key questions in both economic and social policy, following a fine old Cambridge tradition. Rowthorn is a gifted mathematician and a distinguished econometrician, but has used these skills to examine practical policy questions rather than to simply display t...

Econophysics has made a number of important additions to scientific knowledge. Yet it continues to lack influence with both economists and policy makers. Ten years ago, I and three other economists sympathetic to econophysics wrote a paper on worrying trends within the discipline. For example, its lack of awareness of the economics literature, and...

We consider the resilience of a group of 20 Western economies after the financial crisis of the late 2000s. We measure resilience by the growth of real GDP between 2007, the previous peak level, and 2015. The countries exhibit a broad range of experience, from a rise in GDP of 18 per cent in Australia to a fall of 26 per cent in Greece. A substanti...

In situations of what we now describe as radical uncertainty, the core model of agent behaviour, of rational autonomous agents with stable preferences, is not useful. Instead, a different principle, in which the decisions of an agent are based directly on the decisions and strategies of other agents, is offered as a relevant core model. Preferences...

This chapter addresses the question of the conditions under which the culture of different spatial locations will evolve to be predominantly homogenous or predominantly heterogeneous. It is relevant to areas such as language distribution, ideological divisions, assimilation of minorities. Choice in terms of both culture and technology takes place i...

The analysis of news media or other digital sources to derive systematic information about future expectations and behaviour is a promising recent development within applied economics. Advances in computer science and technology now enable even very large text data bases to be searched speedily and efficiently. However, as in the early days of appl...

Following the financial crisis of the late 2000s, policy makers have shown considerable interest in monitoring financial stability. Several central banks now publish indices of financial stress, which are essentially based upon market related data. In this paper, we examine the potential for improving the indices by deriving information about emoti...

The financial crisis of 2008 was unforeseen partly because the academic theories that underpin policy making do not sufficiently account for uncertainty and complexity or learned and evolved human capabilities for managing them. Mainstream theories of decision making tend to be strongly normative and based on wishfully unrealistic “idealized” model...

2 The largely unexpected arrival of the global economic crisis and the largely unpredicted slowness of the recovery from the Great Recession should be precipitating an intellectual crisis across economics and policy making. We require additional theories and additional methods to detect how an economy is evolving and to provide the basis for policy...

A number of recent contributions have tried to add to the understanding and forecasting of the macro economy by analysing news and narratives. In this contribution we report on a new approach to the content analysis of very large text databases. It draws on a new social-psychological theory of decision-making under uncertainty to focus content anal...

Obtaining an accurate picture of the current state of the economy is particularly important to central banks and finance ministries, and of epidemics to health ministries. There is increasing interest in the use of search engine data to provide such 'nowcasts' of social and economic indicators. However, people may search for a phrase because they i...

We explore how cultural heterogeneity evolves without strong selection pressure or environmental differences between groups. Using a neutral transmission model with an isolation-by-distance spatiality, we test the effect of a simple representation of cultural ‘memory’ on the dynamics of heterogeneity. We find that memory magnifies the effect of aff...

There is considerable scope for further privatisation, with the particular aim of sharply reducing public sector claims on national output. However, survey evidence indicates considerable opposition to further privatisations, particularly those taking the form of creating dividend‐paying joint stock companies. The paper considers the value of surve...

We describe an exercise of using Big Data to predict the Michigan Consumer Sentiment Index, a widely used indicator of the state of confidence in the US economy. We carry out the exercise from a pure ex ante perspective. We use the methodology of algorithmic text analysis of an archive of brokers' reports over the period June 2010 through June 2013...

[This corrects the article on p. e83147 in vol. 9.].

For the 20th century since the Depression, we find a strong correlation between a ‘literary misery index’ derived from English language books and a moving average of the previous decade of the annual U.S. economic misery index, which is the sum of inflation and unemployment rates. We find a peak in the goodness of fit at 11 years for the moving ave...

In the 1990s and 2000s, unemployment was seen, both by academic labour market economists and policymakers, as a short-run disequilibrium phenomenon. Policy was aimed at increasing the ‘flexibility’ of the labour market, at removing obstacles to the workings of the market, which would ostensibly restore equilibrium in the labour market. In this arti...

Brand loyalty consists of a consumer’s commitment to repurchase or otherwise continue using a given brand and is demonstrated by repeated buying of a product or service, or other positive behaviours such as word of mouth advocacy.Standard models of the emergence of brand loyalty consider the behaviour of autonomous individuals who are essentially r...

I propose a well founded and radical reform of the curriculum. However, it is not meant to be a detailed manifesto. For example, the core model of agent behaviour in mainstream economics should still be taught. It is not completely irrelevant to the real world. Nevertheless, it should be just one of a number of ways in which agents behave rather th...

This book constitutes the thoroughly refereed post-conference proceedings of the Second International ICST Conference on Complex Sciences, COMPLEX 2012, held in Santa Fe, New Mexico, USA in December 2012. The 29 revised full papers presented were carefully reviewed and selected from various submissions. The papers cover aspects on foundations and a...

A data base developed from the Memorial Institute for the Prevention of Terrorism’s (MIPT) Terrorism Knowledge Base for the years 1998–2005 was provided to participants in the workshop. The distribution of fatalities in terrorist attacks is, like many outcomes of human social and economic processes, heavily right-skewed. We propose an agent based m...

In social network markets, the act of consumer choice is governed not just by the set of incentives described by conventional consumer demand theory, but by the choices of others in which an individuals payoff is an explicit function of the actions of others. We observe two key empirical features of outcomes in such markets. First, a highly right-s...

Rosewell and Ormerod have collaborated for over a decade in Volterra Partners, building models using complexity principles for clients in the public and private sectors. We present examples of agent based models commissioned by policy makers and used as inputs into the decision making process. We discuss problems which arise within both public and...

We outline a vision for an ambitious program to understand the economy and financial markets as a complex evolving system of coupled networks of interacting agents. This is a completely different vision from that currently used in most economic models. This view implies new challenges and opportunities for policy and managing economic crises. The d...

In social network markets, the act of consumer choice in these industries is governed not just by the set of incentives described by conventional consumer demand theory, but by the choices of others in which an individual's payoff is an explicit function of the actions of others. We observe two key empirical features of outcomes in social networked...

The classic economic approach of using incentives is not always the best way to change human behaviour, argues Paul Ormerod.

Paul Ormerod assesses a Bayesian take on predicting everything from poker games to climate change.

In the market economies, sustained output growth is always accompanied by persistent fluctuations. Whether the fluctuations are caused by external shocks or deterministic forces has been a controversial issue in economics, with the dominant mainstream paradigm favouring the former. Here we examine the hypothesis that an important determinant of per...

We observe a marked increase in the spatial homogeneity of the popularity of first names across the United States in recent decades. We explain this by calibrating a modified standard model of neutral cultural evolution to the record of first name popularities for the United States as a whole since 1900 and across the individual states over the las...

In spite of general reductions in government spending, the prime minister has found room in the government's budget to spend money on a major survey of what makes the British people happy. This will be used, in the prime minister’s own words, to guide government policy towards improvement in general wellbeing rather than improvements in national in...

There is considerable evidence of the existence of scaling behaviour (power law relationships) in a number of aspects of economic activity. Here, we examine the evidence on the connections between different industrial sectors, in terms of the value of output which each industry sells to each of the others, and the value of output which the others s...

Traditionally, quantitative social scientists have, for mathematical convenience, assumed that human collective behavior gravitates toward equilibrium. As part of this tradition, mainstream economics (and human behavioral ecology) has as its core the rational agent, who gathers all available information on a problem and then chooses the optimal dec...

We propose using a bi-axial map as a heuristic for categorizing different dynamics involved in the relationship between quality and popularity. The east–west axis represents the degree to which an agent’s decision is influenced by those of other agents. This ranges from the extreme western edge, where an agent learns individually (no outside influe...

In the wake of the global recession and signs of fragility in the UK's own recovery, a panel of eminent economics thinkers and innovators gathered to debate whether and how the notion of government intervention in industry might be resurrected as part of a new approach to economic policy.

In customizing the neutral model for language transmission, Reali & Griffiths [[1][1]] have added a new, ‘Bayesian’ learning interpretation to a neutral model that has been used in cultural evolution studies for some time (e.g. [[2][2]–[6][3]]). While Reali & Griffiths [[1][1], p. 435] dismiss

We consider in this paper the potential for ex ante prediction of the cascade size in a model of binary choice with externalities (Schelling 1973, Watts 2002). Agents are connected on a network and can be in one of two states of the world, 0 or 1. Initially, all are in state 0 and a small number of seeds are selected at random to switch to state1....

Darwinian studies of collective human behaviour, which deal fluently with change and are grounded in the details of social influence among individuals, have much to offer “social” models from the physical sciences which have elegant statistical regularities. Although Darwinian evolution is often associated with selection and adaptation, “neutral” m...

Effective communication strategies regarding health issues are affected by the way in which the public obtain their knowledge, particularly whether people become interested independently, or through their social networks. This is often investigated through localized ethnography or surveys. In rapidly-evolving situations, however, there may also be...

The ideas of modern macroeconomics provided the intellectual justification of the economic policies of the last 10 to 15 years. It is these ideas which the financial crisis falsified. The dominant paradigm in macroeconomic theory over the past 30 years has been that of rational agents who form rational expectations about the future and make optimal...

The ideas of modern macroeconomics provided the intellectual justification of the economic policies of the last 10 to 15 years. It is these ideas which the financial crisis falsified. The dominant paradigm in macroeconomic theory over the past 30 years has been that of rational agents who form rational expectations about the future and make optimal...

The rapid closure of pits during the 1980s in the UK is an example of an economic shock which is not only specific to a particular industry but also to local economic areas. In 1983, only 29 of the 459 local authority areas in the UK was coal mining more than 10% of total employment. Over the 20-year period 1983-2002, average percentage employment...

Many of the problems in the British public sector directly relate to the attempt to create a world fit for the central planner in which all tasks can be set down in a system of rules. The philosophy of 'empirical consequentialism' underpins this entire venture. This is the view that the empirically-proven consequences of an action are the most vali...

The ability to predict overall developments in the economy is extremely limited, even just 1 year ahead. The track record of forecasting is very poor, especially immediately before or during recessions, in other words exactly when good forecasts are needed most by policy-makers. The aims of this paper are to establish stylised facts on the duration...

The economic concept of rationality seems inappropriate in the context of creative innovation, because of its assumption that the tastes and preferences of agents are fixed. The concept of copying, of imitating the behaviour of others, has equal claim to the description 'rational' in an innovative context. Models of ‘binary choices with externaliti...

Individuals are often influenced by the behavior of others, for instance because they wish to obtain the benefits of coordinated actions or infer otherwise inaccessible information. In such situations this social influence decreases the ex ante predictability of the ensuing social dynamics. We claim that, interestingly, these same social forces can...

Using the statistical technique of fuzzy clustering, regimes of inflation and unemployment are explored for the United States, the United Kingdom and Germany between 1871 and 2009. We identify for each country three distinct regimes in inflation/unemployment space. There is considerable similarity across the countries in both the regimes themselves...

Traditional accounts of innovation have tended to neglect the need for change to take place at particular times and in particular places. This paper considers how to move towards a description of innovative processes that take time and place into account. In particular, it looks at the role that cities might play in enabling innovative diffusion. T...

The explosion of interest in H1N1, more popularly called 'swine flu', across the world, from late April to early May 2009, exemplified how information transmission in modern online society can affect the spread of the disease itself. A simple but effective model based on cultural evolutionary theory can characterise in such data the effective degre...

Berger and Le Mens (1) analyze US records of baby-name popularity in the 20th century and nicely demonstrate the symmetry in the rise and decline of patterns of adoption over time. They suggest that this result negates traditional diffusion models “driven by saturation of a pool of potential adopters” (1). Instead, they account for the symmetry of...

In social, economic and cultural situations in which the decisions of individuals are influenced directly by the decisions of others, there is an inherently high level of ex ante unpredictability. We examine the extent to which the existence of social influence may, paradoxically, increase the extent to which the choice which eventually emerges as...

Evidence is growing that in many markets consumers select not simply on the basis of the perceived attributes of products, but their preferences are modified by the behaviour of others. Economists have paid relatively little attention to such markets. We consider evidence from the activity of hill-walking. The Munros are a list of Scottish hills ov...

Two general patterns have been identified for the adoption and subsequent abandonment of ideas or products within a population. One is symmetric, so that concepts or products which are adopted rapidly then decline rapidly from their peak, and those which are slower to move to their peak decline more slowly. The other is asymmetric, where the declin...

This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...

Studies of collective human behavior in the social sciences, often grounded in details of actions by individuals, have much to offer `social' models from the physical sciences concerning elegant statistical regularities. Drawing on behavioral studies of social influence, we present a parsimonious, stochastic model, which generates an entire family...

Evidence is growing that in many markets consumers select not simply on the basis of the perceived attributes of products, but their preferences are modified by the behaviour of others. Economists have paid relatively little attention to such markets. The classic Bass diffusion model incorporates the imitation of others as a part of the behavioural...

The Internet is known to have had a powerful impact on on-line retailer strategies in markets characterised by long-tail distribution of sales [C. Anderson, Long Tail: Why the Future of Business is Selling Less of More, Hyperion, New York, 2006]. Such retailers can exploit the long tail of the market, since they are effectively without physical lim...

In the spirit of the overall topic of the conference, in this paper I consider the extent to which economic theory includes elements of the complex systems approach. I am setting to one side here the developments over the past decade in applying complex systems analysis to economic problems. This is not because this recent work is not important. It...

Studies of collective human behaviour in the social sciences, often grounded in details of actions by individuals, have much to offer 'social' models from the physical sciences concerning elegant statistical regularities. Drawing on behavioural studies of social influence, we present a parsimonious, stochastic model, which generates an entire famil...