Chaos Theory: Expanding the Boundaries of Economic Research

Abstract

The application of chaos theory in economics is associated with an increasing level of uncertainty and external shocks faced by economic systems. This article reviews and systematizes the approaches to the use of chaos theory in economic research. To this end, we discuss the concept of chaos and its relevance; and identify those areas of research for which the application of chaos theory holds most promise. The research methodo­logy comprises methods of system-functional and system-historical analysis. These methods are used to analyze the content of publications devoted to the application of chaos theory to study price fluctuations in individual markets, the behaviour of firms in the conditions of imperfect competition, the analysis of uncertainty of consumer behaviour, as well as cyclical economic development and disequilibrium associated with the ba­lance of unemployment and inflation and geopolitical tensions. The study draws the distinction between the concepts of synergetics and chaos theory. It is shown that although these two research areas are related, they have a different focus of application. The study also identifies some common patterns in the use of chaos theory tools for economic research: at the first stage, elements of chaos, fractals and nonlinearity in the series of economic data are identified; at the second stage, researchers try to explain certain events by using the tools of chaos theory; and at the third stage, chaos theory is used to model and subsequently predict short-term and long-term trends. Chaos theory expands the mathematical apparatus of economic research, allowing researchers to access tools from the field of physics and other natural sciences, which enhances interdisciplinary synthesis.