Can Topology Prevent Another Financial Crash?
New regulations are applying network science to restructure global finance
By Bob Henderson
Could Kevin Bacon have saved us from the 2008 financial crisis? Probably not. But the network science behind six degrees of Kevin Bacon just well may have.
According to the famous saying, every movie actor is separated from Kevin Bacon by six degrees of separation or less, going from co-star to co-star (actually most are separated from Bacon by only three degrees). Actors form a “small-world” network, meaning it takes a surprisingly small number of connections to get from any one member to any other. Natural and man-made small-world networks of all kinds are extremely common: The electric power grid of the western United States, the neural network of the nematode worm C. elegans, the Internet, protein and gene networks in biology, citations in scientific papers, and most social networks are small.
Most of these small networks use hubs, or nodes with an especially large number of links to other nodes. Kevin Bacon is a hub, because he’s starred in so many movies. The RMG neuron in C…
