The Failure of Economic Theory. Lessons from Chaos Theory

Abstract

The crisis that was being shaken the world economy should push economists to wonder about the approach used to analyse economic phenomena. The motivations that have generated it, describing a whole of interdependencies, interacttions, are clear and convincing. But a question remains: if the situation is so clear a posterior why economists have not been able to foresee it? What is happening to economic science if it is not able to recognize an economic crisis before it "steps on it"? How is it possible that the economic science was caught off guard yet again? Besides, what is the implication for the status of economics as a science if it is not able to successfully deal with real economic problems? The aim of the paper is to show the weakness of traditional economic theory and what improvements in terms of description and foresight could be obtained applying chaos theory to the study of economic phenomena. [PUBLICATION ABSTRACT]