Sandpile Economics: Theory, Identification, and Evidence

• URL: http://arxiv.org/abs/2604.13890v1
• Date: Wed, 15 Apr 2026 13:57:16 GMT
• Title: Sandpile Economics: Theory, Identification, and Evidence
• Abstract summary: Sandpile Economics: Why do capitalist economies recurrently generate crises whose severity is disproportionate to the size of the triggering shock?<n>Key state variable is the Forman--Ricci curvature of the input--output graph, capturing local substitution possibilities when supply chains are disrupted.<n>We show that when curvature falls below an endogenous threshold, the distribution of cascade sizes follows a power law with tail index $in (1,2)$, implying a regime of amplification.
• Score: 0.0
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: Why do capitalist economies recurrently generate crises whose severity is disproportionate to the size of the triggering shock? This paper proposes a structural answer grounded in the evolutionary geometry of production networks. As economies evolve through specialization, integration, and competitive selection, their inter-sectoral linkages drift toward configurations of increasing geometric fragility, eventually crossing a threshold beyond which small disturbances generate disproportionately large cascades. We introduce Sandpile Economics, a formal framework that interprets macroeconomic instability as an emergent property of disequilibrium production networks. The key state variable is the Forman--Ricci curvature of the input--output graph, capturing local substitution possibilities when supply chains are disrupted. We show that when curvature falls below an endogenous threshold, the distribution of cascade sizes follows a power law with tail index $α\in (1,2)$, implying a regime of unbounded amplification. The underlying mechanism is evolutionary: specialization reduces input substitutability, pushing the economy toward criticality, while crisis episodes induce endogenous network reconfiguration and path dependence. These dynamics are inherently non-ergodic and cannot be captured by representative-agent frameworks. Empirically, using global input--output data, we document that production networks operate in persistently negative curvature regimes and that curvature robustly predicts medium-run output dynamics. A one-standard-deviation increase in curvature is associated with higher cumulative growth over three-year horizons, and curvature systematically outperforms standard network metrics in explaining cross-country differences in resilience.

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