Economics And Complex Systems Of The United States

Throughout the better part of previous decade, housing prices in the United States, especially in and around metropolitan areas and high population growth areas (such as the Southwest) saw an unprecedented rise in housing prices . In 2007, many of the financial instruments which were used to back the purchase of these properties, such as subprime and Alt-A mortgages, as well as Collateralized Debt Obligations (CDOs), suffered a sudden and massive downturn . In hindsight, it is accepted by a wide range of economists and analysts that the huge upswing in prices and the ensuing downturn comprised a housing market bubble . Bubbles are often studied from the perspective of behavioral economics and complex systems . Many diverse economic agents, all facing the same information regarding rapid housing prices growth, can generate â€Å"irrational exuberance† within markets, leading to huge upswings in prices. Similarly, when the same economic agents begin to hear new information about the unsustainability of such a bubble, an opposing feedback loop is created. When the effect of one feedback loop begins to dominate another, we stand at the precipice of a crash . This highlights the role played by uncertainty- agents are imperfectly informed, as the only information many of these investors see is a rise in prices, driving investment. There is no information available, however, regarding the size, depth or even the possibility of an ensuing downturn. When such a downturn happens (andShow MoreRelatedThe Issue Of Interdependence Has Been An Issue Since The Cold War1466 Words   |  6 PagesIntroduction: The topic of interdependence has been an issue since the inception of the state system and more prominently after the Cold War. Political scientists have debated its significance and vitality in a realism dominated discourse for years. 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