Munich Personal RePEc Archive

On Market Economies: How Controllable Constructs Become Complex

Dominique, C-Rene (2014): On Market Economies: How Controllable Constructs Become Complex.

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Abstract

Since Lėon Walras neoclassical economists hold an inalterable belief in a unique and stable equilibrium for the economic system, which remains to this day unobservable. Yet that belief is the corner stone of other theories such as the ‘Efficient Market Hypothesis’ as well as the philosophy of neo-liberalism, whose outcomes are shown by recent events to be flawed. A modern market economy is indeed a nonlinear controllable construct, but this paper uses the affine nonlinear feedback H∞-control to show that the ‘data requirement’ precludes all attempts at the empirical verification of the existence of a stable equilibrium. In a complex nonlinear deterministic systems, equilibria, whether multiple or deterministically chaotic, depends on their parameter values and uncertainties. The best approach suggested is to focus on endurable patterns thrown-off by such systems.

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