Chaos Models in Economics

TL;DR

This paper explores chaos theory in economics, emphasizing nonlinear models and their surprising ordered structures, with examples from profit models, exchange rates, and capital markets.

Contribution

It highlights the significance of chaos and nonlinearities in economic models and presents specific examples demonstrating chaotic behavior in economic systems.

Findings

Chaotic features are present in profit, exchange rate, and capital market models.

Chaos exhibits a form of symmetry through Feigenbaum numbers.

Nonlinear dynamics are crucial for understanding economic phenomena.

Abstract

The paper discusses the main ideas of the chaos theory and presents mainly the importance of the nonlinearities in the mathematical models. Chaos and order are apparently two opposite terms. The fact that in chaos can be found a certain precise symmetry (Feigenbaum numbers) is even more surprising. As an illustration of the ubiquity of chaos, three models among many other existing models that have chaotic features are presented here: the nonlinear feedback profit model, one model for the simulation of the exchange rate and one application of the chaos theory in the capital markets.