The Failure of Economic Theory. Lessons from Chaos Theory

Faggini, Marisa; Parziale, Anna

doi:10.4236/me.2012.31001

Cited by 24 publications

(10 citation statements)

References 48 publications

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“…2 Models can be interpreted as material or immaterial systems that represent other systems and can thus enable experimental manipulation of the approximated structures and conditions. 3 Lineal systems are conceptions in which elements of the system are arranged consecutively. In contrast to non-lineal systems, feedback loops are often missing in such structures.…”

Section: Explaining Self-organization Phenomenamentioning

confidence: 99%

“…The proposition that order cannot be regarded as a result of planning is supported by Nobel Prize Winner von Hayek, who postulated a constructivist error [1] in this context 1 . Following von Hayek, such an order cannot be adequately researched with commonly used mechanistic models 2 because they are based on lineal 3 cause-andeffect chains that are too predictable.…”

Section: Introductionmentioning

confidence: 99%

“…Eventually, irregular and rapid developments are examined by methods that seem to be applicable only to linear conditions, lineal conditions or steady operations. For a long time, economic science was dominated by the mechanistic worldview, which relied, for instance, on models whose trajectories 4 (with an equilibrium tendency) are predictable and become tangible after partial analysis [3].…”

Section: Introductionmentioning

confidence: 99%

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Synergetics—Fundamental Attributes of the Theory of Self-Organization and Its Meaning for Economics

Liening¹

2014

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The current article will focus on the fundamental idea of synergetics. It addresses the question of how to explain self-organization in a complex system. For this purpose synergetic will be explained with the use of the classic physical example, the laser light. Although the synergetic theory was developed in the field of physics, it is an interdisciplinary approach enabling the general examination of self-organization of complex systems, especially in economic contexts. The so-called swarm intelligence contributes as a bright example from another context. Furthermore, exemplifying for economic application a simple national economy will be interpreted from the synergetic perspective. From an economic perspective, finally the conclusion includes a critical reflection of the approach.

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Section: Explaining Self-organization Phenomenamentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Synergetics—Fundamental Attributes of the Theory of Self-Organization and Its Meaning for Economics

Liening¹

2014

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“…Regarding these considerations, this article is titled "Econoplexity," which refers to the application of the theory of complex systems to economics. In this article, 5 With regard to popular scientific literature, refer to Bestenreiner [8]. Rosser, for instance, notices: "Chaos theory has no single inventor, but a fad for it followed publication of the best-selling book by the journalist, Gleick (1987), a fad further fueled in the popular mind by Goldblums's portrayal of a 'chaotician' in the film Jurassic Park" [7, p. 173].…”

Section: "Run Through" and Introductionmentioning

confidence: 99%

The Breakdown of the Traditional Mechanistic Worldview, the Development of Complexity Sciences and the Pretence of Knowledge in Economics

Liening¹

2013

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This article is an introduction to complexity theory, which will be discussed using the example of economic science. In this context, a short historical overview is intended to demonstrate why the traditional mechanistic worldview persistently remains a part of economic science and how it led to the development of the theory of complex systems, which, for example, can be subsumed under chaos theory. Furthermore, a simple supply and demand model is employed as an example to discuss this new theory and to describe the characteristics of complexity in comparison with the general mechanistic principle. For this purpose, specially designed software is used for the simulation and analysis of selected complex systems.

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“…Faggini and Parziale (2012) [11] stated their dissatisfaction for the inability of economics to foresee and proposed to resort to "Chaos Theory Weatherall (2013) [12] argued that "wild randomness 12 " can be a sign of underlying…chaos…and there is often enough structure to make useful predictions…He left us a hope for predict-ability.…”

Section: On Economic Forecastingmentioning

confidence: 99%

The Myths about Forecasting, Business Cycles and Time Series, Which Prevent Economists to Forecast: With an Application to Shipping Industry

Γουλιέλμος¹

2017

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People did not forgive economists for not forecasting the two great depressions. Especially the second one in end-2008-which followed the 1929-1933 "Great Depression" (starting on 29/10/1929: the "Black Tuesday"). Keynes in 1936, wrote a book on "economics of depression", and showed the way how full employment-through marginal efficiency of capital-can be achieved. He was bypassed by: his death (1946) and his disciples' efforts to "model economic growth" (Harrod, 1939 andDomar, 1946). Progress in capitalistic economies cannot be achieved…without Keynes' animal spirits. The "wrong beliefs" of my fellow economists, which we called them "myths" for sensation, were showed: "myths" about business cycles, time series and forecasting. Though in the long run we are all dead, economic history…remembers. The "trade cycle" theory, which eventually became "business cycle", was in scientific focus from 1907 to 1941, and then disappeared. Cycles made the life of shipowners difficult since 1741: one cycle every 10 years! Ships, however, are assets of long life, living 3.2 times the typical shipping cycle-and we said-for the first time-that the "duration of a shipping slump is related to the durability of ships"...Moreover: cycles are influenced by the state of technology; this stated also for the first time; cycles do not go up x years and exactly x years down. Maritime economists by this made shipowners and shippers happy: but, as shown, most freight rate's peaks lased 1 -2 years and troughs lasted up to 12 years ). We did the opposite: we forecast the nonlinear (shipping) time series index of dry cargoes 1741-2015 (7 years inside the sample and 5 years outside it) testing 5 nonlinear methods and eventually selecting the best one (i.e. the "Kernel density estimation"). The deviations obtained were from 2% to 10% (yearly) from actual-we also indicated a falling trend. In fact there is no turning point up in shipping dry cargo market…by 2020…

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The Failure of Economic Theory. Lessons from Chaos Theory

Cited by 24 publications

References 48 publications

Synergetics—Fundamental Attributes of the Theory of Self-Organization and Its Meaning for Economics

Synergetics—Fundamental Attributes of the Theory of Self-Organization and Its Meaning for Economics

The Breakdown of the Traditional Mechanistic Worldview, the Development of Complexity Sciences and the Pretence of Knowledge in Economics

The Myths about Forecasting, Business Cycles and Time Series, Which Prevent Economists to Forecast: With an Application to Shipping Industry

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