information_criticality_society.tex

information and Phase Transitions in Socio-Economic Systems

Terry Bossomaier, Dan Mackinlay, Lionel Barnett...

\section{Introduction}
\label{sec:intro}
Diamonds are not a good very long term investment! They are steadily turning into graphite. It will take millions of years, but the most stable form of carbon at room temperature and pressure is graphite. Thus diamonds will undergo a phase transition to graphite, albeit over a very long timescale.

When we normally think of phase transitions we think of the states of matter, ice melting to water or water turning to steam.  They are order/disorder transitions. In graphite the carbon atoms are linked together in layers. The layers can slide over one another giving graphite its excellent lubricant properties. In diamond the carbon atoms are linked together in a three dimensional structure with each carbon at the centre of a tetrahedron linked to carbons at all four corners. Thus carbon has to go through a major structural reorganization to change from diamond to graphite.

We can easily see the outcomes of a phase transition of diamond to graphite or a solid turning into a liquid. But are there properties which we can measure which go through  a minimum or maximum at the transition? This turns out to be a surprisingly difficult question to answer. It gets even more difficult if we look for measures which can apply to systems in general, not just to the physical systems above.  Organsiations, societies, economies all go through radical reorganization, but should these changes be called phase transitions. This paper explores a metric based on information theory~xc{shannon} which is quite general if not universal.  It then considers a much newer metric which, on examples to date, might be a predictor of impending transitions:  since stock  markets exhibit such transitions, early warning would be highly desirable.  

sec#p-t discusses the characteristics of phase transitions and the peak in mutual information that accompanies them. It also introduces the idea of transfer entropy, recent extension to mutual information, which in some cases is known to peak before a transition to synchronous behaviour. With this background the first example, considered in section#wick considers a computational example derived from physics.  The computation of mutual information from discrete data is tricky, involving difficult decisions on bin sizes and other stiatistical issues, which are also considered in this section. The next two sections discuss phase transitions in two areas in the social/humanities domain. sec#econo
 discusses how peaks in mutual information occur around stock market crashes. sec#cog discusses the reorganization of strategy in the human brain during the acquisition of expertise. sec#t-e-net discusses how transfer entropy is calculated in practice using the example of inferring social networks from time series data. Finally we conclude in sec#conclusion with some opportunities for further work in the application of these techniques in stock markets and brain science. 

sec:p-t:Overview of Phase Transitions and Metrics: 

sec:wick:Computing Mutual Information for Phase Transitions in Simple Physics Models:

sec:econo:Phase Transitions in Socio-Economic Systems

sec:cog:Phase Transitions in the Acquisition of Human Expertise:

sec:t-e-net:Inferring Social Networks with Transfer Entropy:

sec:conclusion:Conclusions: