More network connections give us more influence

Professor of Stockholm University, Yves Zenou, formerly post-graduate student of Jacques Thisse, Director of the HSE International Laboratory at the Centre for Market Studies and Spatial Economics (MSSE), gave a series of lectures to students at HSE St Petersburg on networks in economics.

Networks in economics explains the role played by information exchange, sharing knowledge, learning, competition and other factors which influence the emergence and growth of networks among different groups. Yves Zenou gave a special interview to the HSE news service about his research and teaching in this field.

— Your research on social interactions and networks is devoted to a relatively new issue in the society. What made you interested it?

— I started working on urban labour issues and, in particular, on the problems faced by ethnic minorities in cities. I was trying to understand why ethnic minorities, especially African Americans in the United States, experience both a severe segregation in cities and very high unemployment rates. I found that there were a strong link between segregation and labour-market outcomes (this is known as the spatial mismatch hypothesis) and I propose different policies to reduce both problems. This is summarized in my book: "Urban Labor Economics" published by Cambridge University Press in 2009. I understood, however, that segregation was not unrelated to social networks and that, because ethnic minorities were isolated in the geographical space, they were also isolated in the social space. I thus decided to make a more serious study of social networks in 2000, which was still in its infancy in economics.

— What are the major findings in social networking by now?

— It is still a growing field within economics. The major findings are that the position in the (social) network of agents is crucial to understanding their outcomes. For example, more central agents are more likely to be criminal than less central agents. Another major finding is the key player policy, which gives predictions on how to reduce crime or increase welfare by targeting some agents in a network. We also better understand why networks are formed and why they have very specific characteristics (such as small world, high clustering and a power law degree distribution).

In his lectures to HSE students, Yves talked about a theoretical structure for looking at networks on the labour market. With the students help, he analysed the mechanism of networks through which a person can find a job and how information from others can help him to stay in work. They also looked at a model for criminal groups which could help find ways to break up the networking channels of a syndicate. The easiest and least expensive way is to imprison the person at the centre of the network, but the key question is, how to find who represents the crucial link without whom the network would collapse? The obvious answer would be the person who has the most direct connections with the other bandits in the group but in fact, it is more important to identify and seize the person who has links with several different criminal groups because he is the intermediary of a much bigger network.   

— Why is it so important and challenging to research networking?

— It is important because networks are everywhere: on the web (facebook, twitter, etc.), in the labour market, in crime, in publishing, in sexual relationships, etc.

It is a very challenging, inter-disciplinary field with sociology, physics, applied mathematics, computer science and economics all working together.

— Could you please describe an "ideal" network if such a thing exists?

— There is no such a thing as an "ideal" network. There are efficient networks, resilient networks, etc. It also strongly depends on which type of network we are talking about.

It is clear that a social network like facebook is very different from R&D networks or banking networks.

— What's next on your plate in terms of research? Do you have further plans to work with researchers and students at the HSE?

— I'm currently working on projects involving the key player policy. In particular, I'm trying to test empirically this policy, which is very challenging. I have started a project with Philipp Ushchev from the HSE in Saint Petersburg. I hope that we will end up with a good paper.

Anna Chernyakhovskaya, specially for the HSE news service