Controlling Endogenous Cycles in an OLG Economy by the OGY Method
We show that very complicated dynamics arising, e.g. from an overlapping generations model (OLG) with production and an endogenous intertemporal decision between labour and leisure, which produces hyperchaos (both eigenvalues with modulus higher than 1), can in fact be controlled or managed with relative simplicity. The aperiodic and very complicated motion that stems from this model can be subject to control by very small perturbations in its parameters and turned into a stable steady state or into a regular cycle. Therefore, the system can be controlled without a change of its original properties. To perform the control of chaos in this economic model we apply the pole-placement technique, developed by Romeiras, Grebogi, Ott and Dayawansa (1992). The application of control methods to chaotic economic dynamics may raise serious reservations, at least on mathematical and logical grounds, to some recent views on economics which have argued that economic policy becomes useless in the presence of chaotic motion (and thus, that the performance of the economic system cannot be improved by public intervention, i.e., that the amplitude of cycles cannot be controlled or reduced). In fact, the fine tuning of the system (that is, the control) can be performed without having to rely only on infinitesimal accuracy in the perturbation to the system, because the control can be performed with larger or smaller perturbations, but neither too large (because these would lead to a different fixed point of the system, therefore modifying its original nature), nor too small because the control becomes too ineffcient.
|Date of creation:||15 Sep 2007|
|Date of revision:|
|Contact details of provider:|| Web page: http://bru-unide.iscte.pt/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Kopel, 1997. "Improving the performance of an economic system: Controlling chaos," Journal of Evolutionary Economics, Springer, vol. 7(3), pages 269-289.
- William A. Barnett & Alfredo Medio & Apostolos Serletis, 1997.
"Nonlinear and Complex Dynamics in Economics,"
- William Barnett & Alfredo Medio & Apostolos Serletis, 2012. "Nonlinear And Complex Dynamics In Economics," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201223, University of Kansas, Department of Economics, revised Sep 2012.
- Barnett, William A. & Serletis, Apostolos & Serletis, Demitre, 2012. "Nonlinear and Complex Dynamics in Economics," MPRA Paper 41245, University Library of Munich, Germany.
- William Barnett & Apostolos Serletis & Demitre Serletis, 2012. "Nonlinear and Complex Dynamics in Economics," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201238, University of Kansas, Department of Economics, revised Sep 2012.
- Bala, Venkatesh & Majumdar, Mukul & Mitra, Tapan, 1998. "A note on controlling a chaotic tatonnement," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 411-420, January.
- Holyst, Janusz A & Hagel, Tilo & Haag, Gunter & Weidlich, Wolfgang, 1996. "How to Control a Chaotic Economy?," Journal of Evolutionary Economics, Springer, vol. 6(1), pages 31-42, February.
- Medio, Alfredo, 1987. "Introduction," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 333-337, September.
- Medio,Alfredo & Gallo,Giampaolo, 1995. "Chaotic Dynamics," Cambridge Books, Cambridge University Press, number 9780521484619, December.
- Kaas, Leo, 1998. "Stabilizing chaos in a dynamic macroeconomic model," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 313-332, January.
When requesting a correction, please mention this item's handle: RePEc:isc:iscwp1:ercwp0808. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Henrique Monteiro)
If references are entirely missing, you can add them using this form.