May's Instability in Large Economies

35 Pages Posted: 8 Feb 2019 Last revised: 24 Sep 2019

See all articles by José Moran

José Moran

Centre d'Analyse et de Mathématique Sociales

Jean-Philippe Bouchaud

Capital Fund Management

Date Written: January 28, 2019


Will a large economy be stable? Building on Robert May’s original argument for large ecosystems, we conjecture that evolutionary and behavioural forces conspire to drive the economy towards marginal stability. We study networks of firms in which inputs for production are not easily substitutable, as in several real-world supply chains. Relying on results from Random Matrix Theory, we argue that such networks generically become dysfunctional when their size increases, when the heterogeneity between firms becomes too strong or when substitutability of their production inputs is reduced. At marginal stability and for large heterogeneities, we find that the distribution of firm sizes develops a powerlaw tail, as observed empirically. Crises can be triggered by small idiosyncratic shocks, which lead to “avalanches” of defaults characterized by a power-law distribution of total output losses. This scenario would naturally explain the well-known “small shocks, large business cycles” puzzle, as anticipated long ago by Bak, Chen, Scheinkman and Woodford.

Keywords: crises, networks, firms, leontief, shocks, supply chain

JEL Classification: L, E3

Suggested Citation

Moran, José and Bouchaud, Jean-Philippe, May's Instability in Large Economies (January 28, 2019). Available at SSRN: or

José Moran (Contact Author)

Centre d'Analyse et de Mathématique Sociales ( email )

54 Boulevard Raspail
Paris, 75006

Jean-Philippe Bouchaud

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
+33 1 49 49 59 20 (Phone)

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics