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Universal fluctuations in growth dynamics of economic systems.

ABSTRACT: The growth of business firms is an example of a system of complex interacting units that resembles complex interacting systems in nature such as earthquakes. Remarkably, work in econophysics has provided evidence that the statistical properties of the growth of business firms follow the same sorts of power laws that characterize physical systems near their critical points. Given how economies change over time, whether these statistical properties are persistent, robust, and universal like those of physical systems remains an open question. Here, we show that the scaling properties of firm growth previously demonstrated for publicly-traded U.S. manufacturing firms from 1974 to 1993 apply to the same sorts of firms from 1993 to 2015, to firms in other broad sectors (such as materials), and to firms in new sectors (such as Internet services). We measure virtually the same scaling exponent for manufacturing for the 1993 to 2015 period as for the 1974 to 1993 period and virtually the same scaling exponent for other sectors as for manufacturing. Furthermore, we show that fluctuations of the growth rate for new industries self-organize into a power law over relatively short time scales.

SUBMITTER: Frey NC

PROVIDER: S-EPMC6345894 | biostudies-other | 2019 Jan

REPOSITORIES: biostudies-other

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Universal fluctuations in growth dynamics of economic systems.

Frey Nathan C NC Matin Sakib S Stanley H Eugene HE Salinger Michael A MA

Scientific reports 20190124 1

The growth of business firms is an example of a system of complex interacting units that resembles complex interacting systems in nature such as earthquakes. Remarkably, work in econophysics has provided evidence that the statistical properties of the growth of business firms follow the same sorts of power laws that characterize physical systems near their critical points. Given how economies change over time, whether these statistical properties are persistent, robust, and universal like those ...[more]

PMID: 30679729

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Project description:BackgroundCombined Heat and Power (CHP) systems can provide a range of benefits to users with regards to efficiency, reliability, costs and environmental impact. Furthermore, increasing the amount of electricity generated by CHP systems in the United States has been identified as having significant potential for impressive economic and environmental outcomes on a national scale. Given the benefits from increasing the adoption of CHP technologies, there is value in improving our understanding of how desired increases in CHP adoption can be best achieved. These obstacles are currently understood to stem from regulatory as well as economic and technological barriers. In our research, we answer the following questions: Given the current policy and economic environment facing the CHP industry, what changes need to take place in this space in order for CHP systems to be competitive in the energy market?MethodsWe focus our analysis primarily on Combined Heat and Power Systems that use natural gas turbines. Our analysis takes a two-pronged approach. We first conduct a statistical analysis of the impact of state policies on increases in electricity generated from CHP system. Second, we conduct a Cost-Benefit analysis to determine in which circumstances funding incentives are necessary to make CHP technologies cost-competitive.ResultsOur policy analysis shows that regulatory improvements do not explain the growth in adoption of CHP technologies but hold the potential to encourage increases in electricity generated from CHP system in small-scale applications. Our Cost-Benefit analysis shows that CHP systems are only cost competitive in large-scale applications and that funding incentives would be necessary to make CHP technology cost-competitive in small-scale applications.ConclusionFrom the synthesis of these analyses we conclude that because large-scale applications of natural gas turbines are already cost-competitive, policy initiatives aimed at a CHP market dominated primarily by large-scale (and therefore already cost-competitive) systems have not been effectively directed. Our recommendation is that for CHP technologies using natural gas turbines, policy focuses should be on increasing CHP growth in small-scale systems. This result can be best achieved through redirection of state and federal incentives, research and development, adoption of smart grid technology, and outreach and education.

Dataset Information

Universal fluctuations in growth dynamics of economic systems.

Publications

Universal fluctuations in growth dynamics of economic systems.

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