Batchelor concludes we have learned yet again just how bad we are at forecasting sharp and hard-to-reverse changes in economic conditions. The linear models that perform well most of the time aren’t cut out for this job. Waiting in the wings are some nonlinear models – of regime switches, catastrophes, and critical network events – that explain how normally stable, complex systems can become unstable, and that might actually provide us with dependable early warnings of bubbles and crashes. Copyright International Institute of Forecasters, 2009
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