Ruya Eser
Mimar Sinan Fine Arts University, Statistics, Department Member
Although traditional economics is based on the assumption that relations are simple, the real world economic systems are generally complex. Economic systems display many of the basic emergent properties of complex systems. In this... more
Although traditional economics is based on the assumption that relations are simple, the real world economic systems are generally complex. Economic systems display many of the basic emergent properties of complex systems. In this framework, the theory of "self organizing criticality" (SOC) it can explain the source of dynamic equilibrium and complexity in economic systems. Self-organized criticality is a concept developed over the last decade from the analysis of dynamical systems investigating the progression of evolutionary systems. The main emphasis in the SOC is to determine the critical conditions that result from the internal dynamics of slow exogenous forces, which are analyzed together with strong local interactions between the elements of the system, leading to significant and meaningful transformations of the behavior of the systems. The SOC began to be seen as an impressive analysis tool for economics, as it could capture and explain catastrophic phenomena such as avalanches seen as the result of aggregate shocks.
This study investigates whether firms in the economy, as complex dynamical systems, show self-organized criticality characteristics. It is examined whether the firm dynamics show a SOC status by determining whether scale invariance and power laws, which are universal laws that determine complex system behaviors, describe the basics of firm distribution. Presence of SOC is investigated in the context of evolutionary growth dynamics for Turkish manufacturing firms for the years 2000 through 2014, where size is approximated by the number of employees, volume of sales and total assets. In this study, firstly the size of the manufacturing firms were tested for suitability to of power law distribution, which is indicative of the complexity of a system. The results indicate that the size of the manufacturing firms in Turkey, measured in terms of number of employees, sales and total assets conform to power law distribution. Secondly, using the same criteria, the existence of a power law distribution for the clusters generated by the k-means clustering method of firm growth was tested. In the empirical findings the distribution of the clusters also proved to be in with power law. Thus, is concluded that the hypothesis of manufacturing firms showing self-organizing criticality characteristics, could not to be rejected.
Keywords: Self Organized Criticality, Firm Size Distribution, Power Law Distribution, Complex Systems, Complexity Economics.
This study investigates whether firms in the economy, as complex dynamical systems, show self-organized criticality characteristics. It is examined whether the firm dynamics show a SOC status by determining whether scale invariance and power laws, which are universal laws that determine complex system behaviors, describe the basics of firm distribution. Presence of SOC is investigated in the context of evolutionary growth dynamics for Turkish manufacturing firms for the years 2000 through 2014, where size is approximated by the number of employees, volume of sales and total assets. In this study, firstly the size of the manufacturing firms were tested for suitability to of power law distribution, which is indicative of the complexity of a system. The results indicate that the size of the manufacturing firms in Turkey, measured in terms of number of employees, sales and total assets conform to power law distribution. Secondly, using the same criteria, the existence of a power law distribution for the clusters generated by the k-means clustering method of firm growth was tested. In the empirical findings the distribution of the clusters also proved to be in with power law. Thus, is concluded that the hypothesis of manufacturing firms showing self-organizing criticality characteristics, could not to be rejected.
Keywords: Self Organized Criticality, Firm Size Distribution, Power Law Distribution, Complex Systems, Complexity Economics.
