How to control a chaotic economy?

Hołyst, Janusz A.; Hagel, Tilo; Haag, Günter; Weidlich, Wolfgang

doi:10.1007/bf01202371

Cited by 58 publications

(25 citation statements)

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“…Id), the oscillation amplitudes are rather limited. This is due to the non-linearity of model equations (70) to (69) and due to the phase shifts between oscillations of different economic sectors i. Note that irregular oscillations with frequencies between 4 to 6 years and amplitudes of about 2.5% are qualitatively well compatible with empirical business cycles.…”

Section: Reproduction Of Some Empirically Observed Features Of Businementioning

confidence: 77%

Supply and Production Networks: From the Bullwhip Effect to Business Cycles

Helbing

Lämmer

2005

Networks of Interacting Machines

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Network theory is rapidly changing our understanding of complex systems, but the relevance of topological features for the dynamic behavior of metabolic networks, food webs, production systems, information networks, or cascade failures of power grids remains to be explored. Based on a simple model of supply networks, we offer an interpretation of instabilities and oscillations observed in biological, ecological, economic, and engineering systems.We find that most supply networks display damped oscillations, even when their units -and linear chains of these units -behave in a nonoscillatory way. Moreover, networks of damped oscillators tend to produce growing oscillations. This surprising behavior offers, for example, a new interpretation of business cycles and of oscillating or pulsating processes. The network structure of material flows itself turns out to be a source of instability, and cyclical variations are an inherent feature of decentralized adjustments. In particular, we show how to treat production and supply networks as transport problems governed by balance equations and equations for the adaptation of production speeds.The stability and dynamic behavior of supply networks is investigated for different topologies, including sequential supply chains, "supply circles", "supply ladders", and "supply hierarchies". Moreover, analytical conditions for absolute and convective instabilities are derived. The empirically observed bullwhip effect in supply chains is explained as a form of convective instability based on resonance effects. An application of this theory to the optimization of production networks has large optimization potentials. 33Networks of Interacting Machines Downloaded from www.worldscientific.com by UNIVERSITY OF BIRMINGHAM on 08/25/15. For personal use only.

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Section: Reproduction Of Some Empirically Observed Features Of Businementioning

confidence: 77%

Supply and Production Networks: From the Bullwhip Effect to Business Cycles

Helbing

Lämmer

2005

Networks of Interacting Machines

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“…There also exists a number of applications of chaos control methods in economic contexts. Holyst et al (1996) apply the OGY method to a model of two competing firms. Kopel (1997) shows in a competitive market model how firms can improve their performance measures by the use of the target method.…”

Section: Discussionmentioning

confidence: 99%

Exchange rate dynamics, central bank interventions and chaos control methods

Wieland

Westerhoff

2005

Journal of Economic Behavior & Organization

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“…Holyst, Hagel, Haag, and Weidlich (1996) apply the OGY method to a case of two competing firms with asymmetric investment strategies and Haag, Hagel, and Sigg (1997) apply the OGY method to stabilizing a chaotic urban system, while Kopel (1997) applies the global targeting method to a model of disequilibrium dynamics with financial feedbacks as do Bala, Majumdar, and Mitra (1998) to a model of tâtonnement adjustment. Kaas (1998) suggests the application of both in a macroeconomic stabilization context.…”

Section: Controlling Chaosmentioning

confidence: 99%

Complex Evolutionary Dynamics in Urban-Regional and Ecologic-Economic Systems

Rosser

2011

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except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights.Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) PrefaceThis is, therefore, the intensest rendezvous. It is in that thought that we collect ourselves, Out of all the indifferences, into one thing:Within a single thing, a single shawl Wrapped tight round us, since we are poor, a warmth, A light, a power, the miraculous influence.Here now, we forget each other and ourselves. We feel the obscurity of an order, a whole. . . Wallace Stevens, 1950, Final Soliloquy of the Interior ParamourWithin the past decade we have seen on the one hand the majority of the world's population come to reside in urban areas for the first time in world history, while on the other we have seen a dramatic rise in average global temperature widely thought to be mostly due to the economic activities humans carry out in those urban areas. Nonlinear complex dynamics are profoundly involved in both of these related developments. This book will open with considering the historical forces behind this rise of cities, including some critiques of certain recent ideas of "new economic geography," and will conclude (except for a mathematical appendix) with a consideration of the science and economics of global warming and how to deal with it in the face of the uncertainties arising from these nonlinear complex dynamics, which will reflect the unique perspective of this author having been involved with climatological research for more than 35 years. In between there will be discussions of broader regional economic dynamics, the foundations of evolutionary theory, and the dynamics of ecologic-economic systems. A deep theme is that in all of these areas, nonlinear complex dynamics can result in discontinuities, such as sudden changes of urban growth patterns or the sudden crashes of biological populations harvested by human beings. These discontinuities can appear with little warning and can serve as the basis for the theories of unexpected events such as "black swans" as proposed by Nassim Taleb (2010).

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How to control a chaotic economy?

Cited by 58 publications

References 10 publications

Supply and Production Networks: From the Bullwhip Effect to Business Cycles

Supply and Production Networks: From the Bullwhip Effect to Business Cycles

Exchange rate dynamics, central bank interventions and chaos control methods

Complex Evolutionary Dynamics in Urban-Regional and Ecologic-Economic Systems

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