Predicting Discontinuity in the Decision to Allocate Funds to Credit Memes with a Fokker-Planck Equation Based Model

The model is one theoretical approach within a broader research program that could verify the nonlinear conjectures made to quantify and predict potential discontinuous behaviour. In this case, the crisis behaviour associated with financial funds reallocation among various credit instruments, described as memes with the sense of Dawkins, is shown to be of discontinuous nature stemming from a logistic penetration into the behaviour niche. A Fokker-Planck equation description results in a stationary solution having a bifurcation like the solution with evolution trajectories on a ‘cusp’ type catastrophe that may describe discontinuous decision behaviour.nonlinear models, decision, financial crisis

Considerations on the Reform in the Power Sector (Avoiding Chaos on the Path to an Optimal Market Structure)

The reform of a single player power sector (i.e. a natural monopoly) into a multiple-players power market brings to the clients not only the benefits of competition but also the costs of complexity. In between the two, an optimal number of players is found, corresponding to the minimum price of power to the clients. Considering time as the third dimension, the optimum curve becomes a potential surface on which the evolution of the market entities is seen as oscillations (mergers and unbundling) along the valley of the minimum price. Every oscillation triggers a price burst, which is detrimental to the clients. To avoid this, the role of the regulator is better defined in the sense of smoothing the transition from monopoly to market. The example of the US and of the EU power sectors evolution is relevant here. In the above approach, long range competition resulting from the future opening of power markets in Europe, or from the penetration, 70 years ago, of the interconnection technology in USA, is compared with the short range (local) competition. Finally, the price limits are determined, which ensure that (i) the new entrants on the market are not eliminated and (ii) the market avoids oscillations (chaotic behavior), which may drastically shock a non-resilient economy. A case study calculation is made for a transition economy (Romania).unbundling power monopoly, deterministic chaos, power markets, optimization

Non-linear effects in knowledge production

The generation of technological knowledge is paramount to our present development. Economic science concentrates on representing the functions of production applied to all sectors, e.g., the well known Cobb-Douglas model, associated with parameters such as capital and labor. Based on the paradigm, demonstrated in another paper, that the production of technological knowledge is governed by the same Cobb-Douglas type model, by the means of research and the intelligence level replacing capital, respectively labor, we are exploring the basic behavior of present days economies that are producing technological knowledge, along with the 'usual' industrial production. Considering the intercorrelations of technology and industrial production we determine a basic behavior that turns out to be a 'Henon attractor', well known as one of the first analyzed systems that present chaotic behavior confined to strange attractors. The behavior inside the basin of the attractor's dynamic shows some interesting features such as the fact that too little effort in technological knowledge production is associated to low industrial production, while too much resource allocation to technological production is also reaching an area of low industrial production. This effect clearly shows that too little allocation of resources to research is equivalent to a disproportionate allocation of resources to research, namely that both hamper the industrial production. Moreover, there is an area of large industrial production that corresponds to a certain rate of technology production that, in some way, optimizes development. Measures are introduced for the gain of technological knowledge and the information of technological sequences that are based on the underlying multi-valued logic of the technological research and on nonlinear thermodynamic considerations. We have witnessed in the last decades several cases of economies, e.g., Ireland and Finland, in Europe, the Asian tigers and China in Asia, which had had a moment in their history when research (both means and intelligence) was a main priority. Luckily, the globalization acted as a stabilizer that kept them close to the optimum of 'As High As Reasonably Acceptable' technological production. By contrast to ALARA (as low as reasonably acceptable) principle, that applies in risk analysis, here we may introduce the AHARA principle resulting from the nonlinear behavior of technological production vs. industrial production.knowledge management, strange attractors, experimental state of knowledge

Nonlinear Considerations on Economic Systems’ Behaviour

Recent work done within the CNCSIS IDEI ID_1046 financed project has resulted in some ideas related to complex system behaviour and to certain ways in which this behaviour may be described using nonlinear models especially in relation to the evolution of the PIB and its components. We are presenting here some of these results and the way an oscillatory response in industrial production may be used to determine the associated differential equation of evolution.nonlinear models, decision, financial crisis

SECOND ORDER DYNAMICS OF ECONOMIC CYCLES

The monthly data of the industrial production in Romania after the structural discontinuity occurring at the end of 1989 show an under-damped oscillatory behavior that suggests an evolution of second order systems excited by a step function. Since this behavior is well described in control systems we are doing what the literature usually calls a reversed engineering of the data in order to identify the specific parameters for the economic cycle of industrial production. The final goal is to determine the second order differential equation that may be associated to the economic process related to industrial production evolution. This paper is a first contribution that opens an alternative approach to describe the economic dynamics.business cycles, simulations, nonlinear methods, transition economies, mathematical methods

The nonlinear GDP dynamics

The oscillatory behavior of GDP and its components leads to a Fourier transform analysis that results in the eigen values of the dynamic economic system. The larger values are dominating the transient behavior of the GDP components and these transients are discussed along with the specific behavior of each component. The second order differential equations are determined, for each component, to describe the oscillatory behavior and the transient resulting from a step excitation. The natural frequencies are determined and the correlation of pairs of components’ cycles result in ‘beats’ process where the modulated wave cycles are compared and discussed. Based on these correlated influence terms the solutions of the differential equations of each component are determined along with their evolution in the phase space and with the specific Lagrangian. The possible occurrence of dynamical behavior basins for GDP is explored, associated to time interval least action considerations. Important conclusions are drawn from this analysis on the dynamics of GDP and its components, in terms of general versus local equilibriums and their evolution

CHANGE OF ENERGY PARADIGM

We are at the beginning of a change of paradigm in the energy systems of the whole World. Both new resources being found and exploited and the new technologies for energy conversion, transport and distribution, along with the associated artificial intelligence systems, are starting to create new futures, with different living values, for the greatest machine created by men: the energy system. Some relevant elements are presented in the paper along with the position and the perspectives of Romania

Institutional Structures as Benard Taylor Processeses

Considering the epistemic and ontological sense of principles and functions and the way they contribute to the creation and evolution of institutional structures a model was developed in which the reaction-diffusion of mimes (Dawkins) in a human niche (Popper) is described as a Brusselator that presents far from equilibrium stabilities of Benard-Taylor type. These dynamic stabilities area associated with the formation and evolution of institutional structures leading to a new interpretation of Heraclit’s ‘panta rei’ principle in visualizing human institutional history.institutions, Benard-Taylor instabilities, reaction diffusion models, mimes dynamic

FOOD VERSUS BIOFUELS – AN ENERGY BALANCE APPROACH

In recent years the production of fuels for transportation has seen first an almost exponential increase then a sort of saturation given by the adverse effect on the agriculture of food products. Since both biofuels and agro products are expressed in energy units, we try here to make a balance in terms of energy units that are correlated to land surface available for food and biofuels in given economies e.g. the Romanian and the USA ones, such that to identify the optimal division of agricultural land to cover both the basic food needs and the biofuel ones. In this first approach food is measured in human daily energy intake converted to equivalent corn and biofuel is measured in the needed fuel for cars also converted in equivalent corn. These two corn quantities are then expressed in the land surface needed to cultivate them, followed by a dynamic analysis of the optimal partition between feeding the population and supplying the cars