Small is Beautiful

We use fragility theory to show the effect of size and response to uncertainty, how distributed decision-making creates more apparent volatility, but ensures long term survival of a system. Simply, economies of scale are more than offset by stochastic diseconomies from shocks and there is such a thing as a “sweet spot” in optimal size. We show how city-states fare better than large states, how mice and small species are more robust than elephants, and how the canton mechanism can potentially solve Near Eastern problems.

This talk was part of “Cities and Development: Urban Determinants of Success” — the NYU Development Research Institute’s 2014 Conference, hosted jointly with the Marron Institute of Urban Management. The conference touched on the role of cities in the development process.

Take a look at Nassim’s Small is Beautiful: Risk, Scale and Concentration.

SMALL IS BEAUTIFUL: RISK, SCALE AND CONCENTRATION

Chapter Summary 17: We extract the effect of size on the degradation of the expectation of a random variable, from nonlinear response. The method is general and allows to show the “small is beautiful” or “decentralized is effective” or “a diverse ecology is safer” effect from a response to a stochastic stressor and prove stochastic diseconomies of scale and concentration (with as example the Irish potato famine and GMOs). We apply the methodology to environmental harm using standard sigmoid dose-response to show the need to split sources of pollution across independent (nonsynergetic) pollutants.