PIIRS Global Systemic Risk Research Community at Princeton University

There is no better indicator of increasing globalization than the massive and accelerating increase in international transactions beginning in the late 1970s. These in turn have required the construction of a complex system of global nodes and links providing the channels through which these can flow. The interdependence of massive global interactions and structures has caused systemic risk to increase exponentially in recent times. Tangible risks—in systems as diverse as energy exploration and production, electricity transmission, computer networks, healthcare, food and water supplies, transportation networks, commerce, and finance—now threaten global political, economic, and financial systems that affect citizens of every nation. As a result, the study of risk has the potential to become an important and influential academic and policy field.

The research community on Global Systemic Risk at Princeton University provides structure for a core group of scholars across a wide variety of disciplines to establish a common dialogue in this emerging field. Working as a group, the depth and breadth of their interests will help to establish a comprehensive and cohesive framework for the study of risk and thus move the field forward. The research community has recieved support from PIIRS and alumni donors and is led by Miguel Centeno, Musgrave Professor of Sociology and a professor of sociology and international affairs.

The community — with a core group of 22 scholars — will frame its multidisciplinary inquiry from a number of vantage points to better understand the nature of risk, the structure of increasingly fragile systems, and the ability to anticipate and prevent catastrophic consequences.

These include:

  • Computer Science
  • Economics
  • Engineering
  • Finance
  • History
  • History of Science
  • Mathematics
  • Operations Research
  • Philosophy
  • Physical Sciences
  • Politics
  • Psychology
  • Public Policy
  • Sociology

More specifically, Global Systemic Risk will focus on the robustness and fragility of global human-made organizational systems and is concerned with risks that have short- to medium-term likelihood and consequences. 

The most obvious example of how interactive systems can lead to risk is the financial crisis of 2007-2008. Over and above regulatory failure and personal malfeasance, the manner in which declines in the real estate values of pockets of American suburbia led to the greatest economic challenge since the Great Depression reflects the interconnectivity and interdependence of financial institutions. The research community argues that other global systems may be subject to the same kind of emergent disruptions: those caused not by the characteristics of any single part, but from the interaction of large numbers of apparently autonomous agents. The global energy system, information networks, and  air and sea transport may increase the efficiency of production and distribution, but may also make these more susceptible to catastrophic failure. Our food and epidemiological security, for example, may be improved by paying greater attention to how the systemic whole comes to represent more than the sum of its parts.

For more information, contact Jayne Bialkowski, program manager.

Upcoming Events

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December 1-3, 2017
Envision Conference
This conference will focus on the future implications of four technological trends: artificial intelligence, synthetic biology, enhanced interfaces, and nanotechnology. Through panels, discussion groups, workshops, a career fair and expo, and a pitch competition, participants will explore how best to pioneer a brighter future in light of the major changes being wrought by technology. Talks range from how to best interface with government from the private sector, to the ethics of existential risks.
Carl ICahn Laboratory, Oval Lounge, Princeton University


Stay tuned for more events coming this fall!

2016-2017 Events


Lo

Tuesday, October 24, 2017
Financial System 2.0: New Approaches to Measuring and Managing Systemic Risk
Andrew W. Lo is the Charles E. and Susan T. Harris Professor of Finance, and the Diretor of the Laboratory for Financial Engineering at the MIT Sloan School of Management. In addition, Professor Lo is a member of the Consortium for Systemic Risk Analytics Academic Advisory Board, the OFR Financial Research Advisory Committee, and the New York Federal Reserve Board’s Financial Advisory Roundtable.
4:30pm, 20 Washington Road, Room A71


Beckford

Thursday-Friday, June 29-30, 2017
Princeton-Cambridge Workshop on Systemic Risk
Co-hosted by Princeton and the University of Cambridge, this workshop brought together scholars from around the world with the goals of defining "systemic risk" as a discipline, identifying a common language to facilitate its study across domains, and open a dialogue about how the field could be useful to policymakers.
Kings College, Cambridge, UK


Workshop Paper Coming Soon
Beckford

Thursday, April 6, 2017
Infrastructure Resilience Matters: Infrastructure Systems and Risk in the United Kingdom
John Beckford, Visiting Professor in the Dept. of Civil, Environmental, and Geomatic Engineering at University College London, Visiting Professor in the Centre for Information Management at Loughborough University, Partner at Beckford Consulting
4:30pm, Lewis Library, Room 138



Elran

Thursday, March 30, 2017
Societal Resilience: A Response Strategy for Man-Made Disruptions
Meir Elran, Head of Program on Homeland Security & Program on Socio-Military Relations, and Senior Research Fellow, Institute for National Security Studies, Tel Aviv, Retired Brigadier General, Israeli Army
4:30pm, 20 Washington Road, Room A71



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Tuesday, December 13, 2016
War and Society
Director of the PIIRS GSR research community Miguel Centeno is Musgrave Professor of Sociology, Professor of Sociology and International Affairs, and Chair of the Department of Sociology at Princeton University. Centeno will discuss his new book War and Society, which expores the many paradoxes of warfare and the impact it has on the human experience.
4:30pm, Aaron Burr Hall, Room 219



Venkat

Wednesday, December 7, 2016
The Architecture of Collapse: The Global System in the 21st Century
Mauro Guillén, Director of Joseph A. Lauder Institute at Univresity of Pennsylvania, Dr. Felix Zandman Professor of International Management, Wharton School, Professor of Sociology, University of Pennsylvania
Discussant: Simon Levin, George M. Moffett Professor of Biology, Professor of Ecology and Evolutionary Biology, Princeton University
4:30pm, Guyot Hall, Room 10



citp

Wednesday, November 30, 2016
Internet Resilience: Global Network, Global Risks
Nick Feamster, Professor of Computer Science, Acting Director of the Center for Information Technology Policy, Princeton University
Jennifer Rexford,Gordon Y.S. Wu Professor of Engineering, Chair of the Computer Science Department, Princeton University
4:30pm, Computer Science Building, Room 104



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Friday, November 18, 2016
Comparing Alternative Policies Against Environmental Catastrophes
Avinash Dixit is John J.F. Sherrerd '52 University Professor of Economics, emeritus, at Princeton University. Dixit discussed the findings of his recent working paper on "Comparing Alternative Policies Against Environmental Catastrophes."
12:00pm, Wallace Hall, Room 165


Research

Link to BookMaking Electricity Resilient: Risk and Security in a Liberalized Infrastructure (2017)
Antti Silvast

Summary:
Antti Silvast was a visiting postdoctoral research fellow at the PIIRS Global Systemic Risk research community during the 2014-15 academic year. During this year, he worked to draft a manuscript of his book Making Electricity Resilient: Risk and Security in a Liberalized Infrastructureq, published by Routledge in May 2017. Drawing on multi-sited ethnographic field work, the book unpacks the work of the authorities, electricity companies, and lay persons that keeps energy systems from failing and helps them to recover from disruptions if they occur. It explores a number of sites in so doing: the historical security policy of energy infrastructures; control rooms where electricity is traded and maintained in real time; and electricity consumers in their homes.


Link to ArticleShy of the Character Limit: "Twitter Mood Predicts the Stock Market" Revisited (2017)
Michael Lachanski and Steven Pav
Econ Journal Watch 14(3)

Abstract:
In the 2011 article “Twitter Mood Predicts the Stock Market” by Johan Bollen, Huina Mao, and Xiaojun Zeng, published in Journal of Computational Science, the authors estimated a proprietary measure of Twitter ‘calm’-ness and found that this measure Granger-caused increases in the Dow Jones Industrial Average from February 28, 2008 to November 3, 2008. The paper and related work has attracted attention by journalists, finance practitioners, and academics. In just six years the paper accumulated 2,514 Google Scholar citations and 678 Web of Science citations (as of April 24, 2017). We subject the paper to thoroughgoing scrutiny, including an attempt to replicate the findings in-sample. Using the authors’ subsampling technique, we replicate their sample window (less the since-deleted and hence unavailable tweets) and extend it backwards to include 2007. Constructing multiple measures of Twitter mood using word-count methods and standard sentiment analysis tools, we are unable to reproduce the p-value pattern that they found. We find evidence of a statistically significant Twitter mood effect in their subsample, but not in the backwards extended sample, a result consistent with data snooping. We find no evidence that our measures of Twitter mood aid in predicting the stock market out of sample. Congruously, the hedge fund set up in late 2010 to implement the Twitter mood strategy, Derwent Capital Markets, failed and closed in early 2012.


Link to SlidesGlobal Systemic Risk: A Research Agenda - Presentation for The Royal Society, London (2017)
Miguel Centeno

Summary:
In January of 2017, Miguel Centeno, the director of the GSR research community, traveled to London to present the group's reserach at The Royal Society. His slides from that presentation are available at the link above.


Link to ReportSystemic Risk in Global Agriculture - Conference Report (2016)
Summary of proceedings of Princeton-Columbia joint-conference held October 24-25, 2014, in Princeton, New Jersey.

Abstract:
The emerging research fields of systemic risk and systems thinking provide insight into understanding and mitigating the current risks and challenges in our global agriculture network. Since the Green Revolution of the mid-20th century, the global agricultural system has become an increasingly complex and interconnected network of networks, which, in spite of massive productivity gains, has become systemically fragile and vulnerable to shocks.  Over the course of two days, 27 scholars from diverse fields came together at Princeton University to discuss topics within the theme of agricultural systemic risk. The goal of this conference was to generate an interdisciplinary conversation among scholars who study agriculture, systems, and risk in order to identify the causes and consequences of agricultural fragility, and to propose solutions for increasing resilience within the agricultural system. This report is a comprehensive overview of the conference proceedings: providing an overview of the current state of the modern agriculture system and outlining the critical risks, potential solutions, and remaining challenges highlighted by the participants. Videos and a full transcript of the conference are available here.


Link to ArticleThe Emergence of Global Systemic Risk (2015)
Miguel A. Centeno, Manish Nag, Thayer S. Patterson, Andrew Shaver, and A. Jason Windawi
Annual Review of Sociology pg. 41.

Abstract:
We discuss the increasing interdependence of societies, focusing specifically on issues of systemic instability and fragility generated by the new and unprecedented level of connectedness and complexity resulting from globalization. We define the global system as the set of tightly-coupled interactions that together allow for the continued flow of information, capital, goods, services, and people. Using the general concepts of globality, complexity, networks, and the nature of risk, we analyze case studies of infrastructure, trade, finance, the environment, and epidemiology in order to develop empirical support for this concept of global systemic risk. We seek to identify and describe the sources and nature of such risks and methods of thinking about risks which may inform future academic research and policymaking decisions.


Link to WebsiteGlobalization and Network Mapping (2011)
Miguel Centeno and Manish Nag
Princeton University

Summary:
Globalization is a complex process in all senses of the word: it involves potentially millions (if not billions) of actors, has existed in different forms for thousands of years, encompasses a varied set of human relationships from exchanges to conquest, and may produce "emergent" properties that cannot be predicted based on the characteristics of its component parts. How then to understand it without speaking of banal generalities or becoming engrossed in details not relevant to the overall structure? We suggest that using graphics and cartography may represent one productive method. For the past decade, several of us have been working on how to create portals that would assist in the understanding of and research on globalization.


Link to ArticleA Risky Proposition: Has Global Interdependence Made Us Vulnerable? (2014)
Michael Hotchkiss
Princeton Discovery Magazine 2014-2015


Working Papers

Link to PaperComparing Alternative Policies Against Environmental Catastrophes (2016)
Working Paper by Timothy Besley and PIIRS GSR Research Community member Avinash Dixit

Abstract:
We construct a model with three features important in the context of major environmental catastrophes: (1) the distribution of possible damage has a fat tail, (2) the probability of the catastrophic event increases as greenhouse gases accumulate, (3) a technological solution may emerge making conservation efforts unnecessary. We solve the model numerically for plausible values of the parameters, and evaluate the tradeoffs between alternative policies such as prevention, mitigation, and technological fixes.


Contact Us

For more information about the Global Systemic Risk Research Community, please email the group's coordinator, Thayer Patterson, at tspatter-at-princeton.edu.