They may also give rise to abrupt shifts or discontinuities in system behaviour if pushed beyond a critical threshold or tipping point (Wilson and Kirman (2016)). These complex patterns are often referred to as “emergent” behaviours because they “emerge” without any outside stimulus. And because these emergent patterns arise from complex interactions, they are often difficult or impossible to predict. 21  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  21  To bring this to life, imagine that instead of a single wooden rocking horse, the system instead comprised a pack of wild horses. Taking a stick to one of them will generate “emergent” behaviour. It may result in them all staying put, one of them fleeing or all of them fleeing. And if they do all flee, this will be in a direction, and to a destination, impossible to predict. These emergent behaviours depend crucially on behavioural interactions within the system. In the natural sciences, examples of these emergent behaviours are legion. They include the dynamics of sandpiles which “self-organise” as each new grain of sand is added until a tipping point is reached and collapse occurs (Bak, Tang and Wiesenfeld (1988)); the flocking of migrating birds and fish, whose patterns exhibit complex, and sometimes chaotic, patterns of motion (Macy and Willer (2002)); and the dynamics of traffic jams among cars and pedestrians, whose flows are irregular and emergent (Nagel and Paczuski (1995)). These emergent properties of complex systems carry important implications for model-building.
At this time, although monthly value of land transactions has risen back to the previous peak level in 1996 and bank credits extended to real estate developers has picked up, we feel that there is no sign of overheating in this sector yet. Latest land prices have increased only by 14 percent on average, while housing prices for low- and medium-income families rose by less than 10 percent over that of last year. Nonetheless, it is important to keep a watchful eye on developments in the real estate sector, by making sure that bank lending to this sector is prudent. And for our part, there is now greater willingness to use the necessary prudential measures to discourage or forestall any undesirable development. Financial institutions are now required to report all real estate loans exceeding 100 million baht. Any real estate lending that is deemed too risky would require immediate additional provisioning. This should help ensure that growth of the real sector is driven by quality growth with least amount of bubbles, and that policy is proactive enough to prevent a reoccurrence of the real estate bubble prior to the 1997 crisis. To improve our ability to monitor this sector, we have developed a housing price index in cooperation with a number of agencies including the Government Housing Bank. This housing price data will be important for assessing the underlying conditions in the housing market, and will allow us to monitor any concentrations of risk before they develop in this sector.