🤖 AI Summary
This study investigates how economic shocks propagate through real-world production networks via transverse stress mechanisms, leading to systemic instability. Drawing an innovative analogy to the physical Hall effect, the authors develop a cascading failure model that integrates transverse exposure-driven dynamics with sandpile-like threshold behavior, thereby avoiding artificial near-criticality induced by row-stochastic operators. Leveraging real input–output data from the World Input–Output Database (WIOD), the framework combines discrete toppling rules, multiplicative transfer functions, and Monte Carlo simulations to identify four distinct dynamical regimes—stable absorption, latent fragility, critical transition, and avalanche—across multiple propagation normalizations. The findings reveal that both avalanche magnitude and systemic risk increase concomitantly with field strength and redundancy stress, yet no universal power-law criticality is observed, challenging the prevailing assumption of self-organized criticality in economic networks.
📝 Abstract
This paper develops a Hall-Sandpile model of economic instability that combines a Hall-like transversal stress mechanism with sandpile threshold dynamics on a real production-network substrate. In analogy with the physical Hall effect, where exposed flows under an external field generate stress in a transversal direction, we model economic shocks as fields that act on flow-intensive, low-redundancy, low-capacity nodes and produce systemic stress through a multiplicative conversion function. The accumulated stress drives a discrete toppling rule and an avalanche dynamics whose effective activation threshold declines with transversal exposure. The model is calibrated on annual World Input--Output Database (WIOD) production networks for 2000--2014 and simulated on the 2014 substrate (2{,}283 country--sector nodes) under three alternative propagation normalisations to avoid mechanical near-criticality from row-stochastic operators. Controlled Monte Carlo experiments over external field intensity and redundancy stress generate four ordered regimes: stable absorption, latent fragility, critical transition, and avalanche regime. Mean avalanche size and the probabilities of finite-size systemic events $\Pr(S\!\geq\!5)$, $\Pr(S\!\geq\!10)$ and $\Pr(S\!\geq\!20)$ rise jointly with field intensity and redundancy stress. Tail diagnostics show regime-dependent thickening of the avalanche distribution, but the estimated tail indices remain too high to interpret as evidence of universal power-law criticality. The contribution is therefore a finite-size, real-network description of how transversal stress activates structural fragility, not a claim of self-organised criticality in the global economy.