Munich Personal RePEc Archive

How Market Economies Come to Live and Grow on the Edge of Chaos

Dominique, C-Rene (2015): How Market Economies Come to Live and Grow on the Edge of Chaos.

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Abstract

Summary: In a Hayek-Friedman-Lucas world, market economies are assumed to be natural, stable, and ergodic; hence, government policies are harmful to their efficiency. We develop a nonlinear dissipative dynamic model that shows that market economies instead live on the edge of chaos. We next appeal to the theory of differential equation to show that if they do not usually dissipate the totality of the information produced by their evolution it is due to a far-off self-organized equilibrium brought about by a spontaneous phase change originating in an optimal government policy.

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