The chaotic system and new perspectives for economics methodology. A note

Abstract

Historically, economists have, whenever possible, used linear equations to model economic phenomena, because they are easy to manipulate and usually yield unique solutions. However, it now has become impossible to ignore the fact that many important and interesting phenomena are not amenable to such treatment. With the chaos theory it is possible to take into account those aspects of the phenomena. The theory of chaos is challenging many of the fundamental presuppositions of the traditional older Newtonian world view of science. The implications of the new science vision will be explored starting from physics to arrive at economics in terms of their challenges to the traditional methodological views. In particular the implications of chaos control theory for the economics will be highlighted. The purpose of this paper is to show why the economists can no longer ignore that economics is a complex system and how the application of chaos control methods could improve the system's economic performance.