Problems with the Problem of Synchronization
The allure of the rigor and predictive power of physical theory is a perennial temptation in the study of problems in economics and sociology. The hypothesis articulated in the The Problem of Synchronization, provides a case study. It posits that markets are fundamentally mechanisms for temporal coordination, utilizing price signals to synchronize the disparate rhythms of production and consumption. This perspective provides a provocative critique of models that abstract away from dimensions of time and frequency. Extending this metaphor to phenomena like the breakdown in the Decoupling in the Nickel Market and the fragility explored in Synchronization and Banking promises profound insights. Yet the gap between a metaphor and a rigorous, quantifiable theory remains vast. The physical analogy itself invites us to elide over many profound conceptual challenges that prevent its direct application (much less usefulness) in practice.
A first challenge is that the analogy rests upon a definitional ambiguity that threatens its structural integrity. In physics, phase-locking in coupled oscillators is observed under precisely defined conditions in which oscillator frequency, phase, and coupling have a certain range in physical units (or dimensionless constants) with respect to one another. Mapping these concepts to human behavior is fraught with difficulty. What, precisely, is the intrinsic frequency of a consumer (much less producer, which may be an entire organization of humans)? While certain economic activities exhibit statistical periodicity (at least within some time window), human behavior in general is strategic, adaptive, and often aperiodic. Without a rigorous identification of the state variables and their dynamics within some narrow regime, the application of mathematical tools derived from dynamical systems remains a superficial exercise.
This definitional ambiguity inevitably leads to a conflation of otherwise independent phenomena. A viable theory must rigorously distinguish between true synchronization (emergent order arising from mutual interaction), correlation (shared response to an exogenous driver), and herding (behavioral homogeneity driven by information cascades or strategic complementarity). A bank run, for example, exhibits synchronized behavior, but how or why should the underlying mechanism for synchronization be understood as entrainment of oscillations rather than as a rapid shift in strategic incentives or a cascade of fear? A failure to delineate among these seemingly distinct causal structures only obscures.
The second and more fundamental challenge lies in the nature of humans themselves. Physical systems are governed by invariances and symmetries that lend themselves to parsimonious laws. To an almost incredible extent, the behavior of a physical system composed of passive elements can be modeled as minimization of an energy function. Invariances and symmetries are harder to come by in observing human behavior, and their behavior even at a scale in which individual idiosyncrasies may tend to cancel out cannot be accurately modeled with a simple function.
Moreover, the coupling mechanisms in economics bear little resemblance to their physical counterparts. Economic coupling is not mediated by invariant physical forces, but by abstract, endogenous, and transient factors: information, trust, expectations, and institutional rules. This coupling is inherently fragile. As the LME Nickel incident demonstrated, the very infrastructure that coordinates behavior — contract enforcement and the integrity of the clearinghouse — can be switched off by regulatory fiat. A model derived from physics cannot easily account for a coupling that vanishes or reverses polarity based on the state of the system it governs.
These fundamental challenges seem to render the central thesis impossible to formalize as a unified theory of market behavior. The synchronization hypothesis represents, for now, a provocative organizational metaphor rather than a testable hypothesis. Any normative distinctions drawn between "good" synchronization (market clearing) and "bad" synchronization (systemic crisis) are, therefore, suspect; they represent post hoc interpretations of outcomes rather than deductions derived from a unified dynamical principle.
Yet the intuition that timing and coordination are central to economic stability is too important to discard. The hypothesis may be rehabilitated as a formal theory by narrowing its focus to specific subsystems where the preconditions for synchronization dynamics are more closely met, and where definitions can be made precise. The domain of banking liquidity is of interest. Maturity transformation is inherently a problem of temporal mismatch. By utilizing high-frequency data from interbank payment systems, it might be possible to define rigorous measures of liquidity "phase" and interaction "coupling," allowing for a quantitative assessment of systemic risk arising from synchronized stress.
Similarly, the microstructure of the modern order book provides a fertile laboratory. In this high-frequency domain, the "consumers" and "producers" are often algorithms interacting at very short timescales, their strategies are relatively constrained, and the coupling mechanism — the interaction of order flow within the limit order book — is directly observable. Here, synchronization analysis can identify emergent instabilities, such as algorithmic phase-locking or synchronized liquidity withdrawal, which precipitate flash crashes. In these and other narrower contexts, synchronization serves not as a universal explanation, but as a helpful lens. It is a lens that captures the endogenous dynamics of coordination and collapse, revealing aspects of market behavior that remain obscured by equilibrium approaches.
Last, but not least, let me quote Joseph Campbell:
Half the people in the world think that the metaphors of their religious traditions, for example, are facts. And the other half contends that they are not facts at all. As a result we have people who consider themselves believers because they accept metaphors as facts, and we have others who classify themselves as atheists because they think religious metaphors are lies.
When it comes to the synchronization of human behavior, let us be neither religious believers nor atheists.