Accidental politicians: How randomly selected legislators can improve parliament efficiency

Pluchino, Alessandro; Garofalo, Cesare; Rapisarda, Andrea; Spagano, Salvatore; Caserta, Maurizio

doi:10.1016/j.physa.2011.06.028

Cited by 39 publications

(44 citation statements)

References 19 publications

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“…The latter is a further confirmation that, in complex social and economical contexts where chance plays a relevant role, the efficiency of alternative strategies based on random choices can easily overtake that of standard strategies based on the "naively meritocratic" approach. Such a counterintuitive phenomenon, already observed in management, politics and finance ( [48,49,50,51,52,53,54,55]), finds therefore new evidence also in the research funding context.…”

Section: Serendipity Innovation and Efficient Funding Strategiesmentioning

confidence: 89%

“…In other words, if luck matters, and if it matters more than we are willing to admit, it is not strange that meritocratic strategies reveal less effective than expected, in particular if we try to evaluate merit ex-post. In previous studies [48,49,50,51,52,53,54,55], there was already a warning against this sort of "naive meritocracy", showing the effectiveness of alternative strategies based on random choices in management, politics and finance. Consistently with such a perspective, the TvL model shows how the minimum level of success of the most talented people can be increased, in a world where luck is important and serendipity is often the cause of important discoveries.…”

Section: Effective Strategies To Counterbalance Luckmentioning

confidence: 99%

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Talent Versus Luck: The Role of Randomness in Success and Failure

Pluchino

Biondo

Rapisarda

2018

Advs. Complex Syst.

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101

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The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, smartness, efforts, willfulness, hard work or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success. But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories. It is very well known that intelligence (or, more in general, talent and personal qualities) exhibits a Gaussian distribution among the population, whereas the distribution of wealth -often considered a proxy of success -follows typically a power law (Pareto law), with a large majority of poor people and a very small number of billionaires. Such a discrepancy between a Normal distribution of inputs, with a typical scale (the average talent or intelligence), and the scale invariant distribution of outputs, suggests that some hidden ingredient is at work behind the scenes. In this paper, with the help of a very simple agent-based toy model, we suggest that such an ingredient is just randomness. In particular, we show that, if it is true that some degree of talent is necessary to be successful in life, almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals. As to our knowledge, this counterintuitive result -although implicitly suggested between the lines in a vast literature -is quantified here for the first time. It sheds new light on the effectiveness of assessing merit on the basis of the reached level of success and underlines the risks of distributing excessive honors or resources to people who, at the end of the day, could have been simply luckier than others. With the help of this model, several policy hypotheses are also addressed and compared to show the most efficient strategies for public funding of research in order to improve meritocracy, diversity and innovation.

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Section: Serendipity Innovation and Efficient Funding Strategiesmentioning

confidence: 89%

Section: Effective Strategies To Counterbalance Luckmentioning

confidence: 99%

Talent Versus Luck: The Role of Randomness in Success and Failure

Pluchino

Biondo

Rapisarda

2018

Advs. Complex Syst.

Self Cite

101

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“…In fact, in situations of high uncertainty, personal information exchange may reach market-wide impacts, as the examples of bank runs [28] and speculative attacks on national currencies [29] show.Our study explores how huge herding avalanches in financial trading might be reduced by introducing a certain percentage of traders who adopt a random invest-ment strategy. Actually, several analogies between socioeconomic and physical or biological systems have recently been discussed [30][31][32][33], where noise and randomness can have beneficial effects, improving the performance of the system [34][35][36][37][38][39][40][41][42]. More specifically, in a recent series of papers, it has been explored whether the adoption of random strategies may be advantageous in financial trading from an individual point of view.…”

mentioning

confidence: 99%

Reducing financial avalanches by random investments

Biondo¹,

Pluchino²,

Rapisarda³

et al. 2013

Phys. Rev. E

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Building on similarities between earthquakes and extreme financial events, we use a self-organized criticality-generating model to study herding and avalanche dynamics in financial markets. We consider a community of interacting investors, distributed on a small-world network, who bet on the bullish (increasing) or bearish (decreasing) behavior of the market which has been specified according to the S&P500 historical time series. Remarkably, we find that the size of herding-related avalanches in the community can be strongly reduced by the presence of a relatively small percentage of traders, randomly distributed inside the network, who adopt a random investment strategy. Our findings suggest a promising strategy to limit the size of financial bubbles and crashes. We also obtain that the resulting wealth distribution of all traders corresponds to the well-known Pareto power law, while the one of random traders is exponential. In other words, for technical traders, the risk of losses is much greater than the probability of gains compared to those of random traders.PACS numbers: 89.65. Gh,89.65.Gh, 05.65.+b Financial markets often experience extremes, called "bubbles" and "crashes". The underlying dynamics is related to avalanches, the size of which is distributed according to power laws [1][2][3][4][5][6][7][8]. Power laws imply that crashes may reach any size-a circumstance that may threaten the functionality of the entire financial system. Many scientists see "herding behavior" as the origin of such dangerous avalanches [9][10][11][12][13][14][15][16]. In our paper, we explore whether there is a mechanism that could stop or reduce them.To generate a power-law dynamics similar to the volatility clustering in financial markets, we use an agentbased model that produces the phenomenon of selforganized criticality (SOC) [17]. Specifically, we adapt the Olami-Feder-Chrstensen (OFC) model [18,19] that has been proposed to describe the dynamics of earthquakes [6,20]. In this context, we assume information cascades between agents [21] as the underlying mechanism of financial avalanches. We assume that agents interact within a small-world (SW) network of financial trading [22] and that there is social influence among them [23,24]. Such kinds of models are recently becoming popular in economics [25] and herding effects are also beginning to be observed in lab experiments [26]. In this connection, it is interesting to consider that humans tend to orient themselves at decisions and behaviors of others, particularly in situations where it is not clear what is the right thing to do [27]. Such conditions are typical for financial markets, in particular during volatile periods. In fact, in situations of high uncertainty, personal information exchange may reach market-wide impacts, as the examples of bank runs [28] and speculative attacks on national currencies [29] show.Our study explores how huge herding avalanches in financial trading might be reduced by introducing a certain percentage of traders who adopt a random invest...

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“…While the idea itself is not new to physics it was just only recently applied to socio-economic systems. E.g., it was shown that random promotions might lead to more efficient hierarchical structures [65] as well as "accidental" politicians potentially improving legislature process [66]. In a couple of more recent publications this idea was applied to the financial markets.…”

Section: Agent-based Herding Model With Controlled Agentsmentioning

confidence: 99%

Herding interactions as an opportunity to prevent extreme events in financial markets

Kononovičius

Gontis

2015

Eur. Phys. J. B

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A characteristic feature of complex systems in general is a tight coupling between their constituent parts. In complex socio-economic systems this kind of behavior leads to self-organization, which may be both desirable (e.g. social cooperation) and undesirable (e.g. mass panic, financial "bubbles" or "crashes"). Abundance of the empirical data as well as general insights into the trading behavior enables the creation of simple agentbased models reproducing sophisticated statistical features of the financial markets. In this contribution we consider a possibility to prevent self-organized extreme events in financial market modeling its behavior using agent-based herding model, which reproduces main stylized facts of the financial markets. We show that introduction of agents with predefined fundamentalist trading behavior helps to significantly reduce the probability of the extreme price fluctuations events. We also investigate random trading, which was previously found to be promising extreme event prevention strategy, and find that its impact on the market has to be considered among other opportunities to stabilize the markets. *

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Accidental politicians: How randomly selected legislators can improve parliament efficiency

Cited by 39 publications

References 19 publications

Talent Versus Luck: The Role of Randomness in Success and Failure

Talent Versus Luck: The Role of Randomness in Success and Failure

Reducing financial avalanches by random investments

Herding interactions as an opportunity to prevent extreme events in financial markets

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