Wei Pan Thesis Defense: Reality Hedging, Social System Approach for Modeling Economic and Financial Dynamics

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MIT Media Lab

Wei Pan

This dissertation’s main contribution is a new methodology, Reality Hedging, to use big-data driven approaches and tools from computational social science for understanding, monitoring and designing financial social systems. The center idea in this approach is to treat economic and financial systems as systems of connected people.

We are entering a new age where many aspects of our lives are digitized thanks to social media and smart phones. As we see new areas of research topics using these datasets to establish new behavioral and social theories about our society (e.g. Reality Mining, Social Network Analysis, etc), it is natural to ask if and how can we use these advancements to build better economic and financial structures and institutions especially after the past financial crisis. After all, all economic systems are systems of people, rather than systems of atoms which always follow the same physics principles and mechanism. Wei Pan collected and analyzed some large economic and financial social systems from individual levels to city levels. In this dissertation, he focuses on results and findings that can be used to build resilient and productive economic social systems, and can be used to hedge out risks resulting from the social connectivities.

In this thesis, he will discuss the data itself, and especially many of his research efforts to collect valuable large-scale behavior data using smart phones. He will show that such datasets are helpful in inferring many financial insights and economic behaviors about human beings. He will expand individual observations to new models for understanding the innovation economics in cities. He will discuss how ideas flow between people in a city, which can be measured precisely using mobile phone datasets, can impact the city-scale economic growth and developments. He will continue to elaborate the idea of idea flow in behavior changes by focusing on the study of eToro trading, an online trading platform which allows traders to discuss and share trades with each other. Many connections between financial dynamics (rational thinking, irrational reaction and bubbles) with social dynamics (social influence, information flow and network) will be examined. Finally, he will cover some new big data approaches for understanding large scale economic incentives.

Host/Chair: Alex 'Sandy' Pentland


Michael W. Macy, Andrew W. Lo

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