Re: Why economists do not care about high rates of unemployment w

[Steve.Keen@xxxxxxxxxxx]

e ill-behaved chaos, well-behaved chaos, and general theories.

My email "crashed" halfway through a message, to which PD has
replied. Here is the intended 1st message (minus the typos)

If a chaotic system has an unstable equilibrium -- i.e., a point
towards which the system is first attracted and then repelled--
then an additional nonlinearity *in the reverse direction* can convert
that point into an attractor set. Then, instead of first collapsing
(towards stability) and then expanding (towards instability),
the system can fluctuate cyclically around the initial point. Thus
adding government intervention can be defended on the basis of
chaotic analysis.

Paul comments:
"Dear Steve Keen: Note that what you are "interested in" is a very special case
where it is PRESUMED that laissez faire  market equilibria is "ill-behaved"
and government imposed equilibria is well behaved. Presuming your case is
not likely to be convincing to those who believe in the market -- Nor can your
presumed ill-behaved vs well-behaved dichotomy be taken as a general theory."

The core of the model I developed were the following assumptions:

Workers are more likely to demand wage rises during booms than slumps
("Phillips curve");
Capitalists invest more during booms than slumps;
Banks lend to capitalists to finance investment;
Government taxes (should) rise during a boom ("built-in stabilisiers")
Government spending does rise during a slump.

There was no built-in presumption that laissez-faire was unstable: both
the system's instability without government intervention, and the
stabilising impact of that intervention, belong to the class of outcomes
known as "emergent behaviour", where a complex interaction results out of
relatively simple rules. Those simple rules, which I agree are not
based on a general theory, are nonetheless rather hard to object to.

Cheers,
Steve Keen