IDEAS home Printed from https://ideas.repec.org/a/bla/ausecp/v63y2024i1p16-35.html
   My bibliography  Save this article

Catastrophe theory and economic modelling at the back of an envelope

Author

Listed:
  • Eduardo Pol

Abstract

Catastrophe theory (CT) emerged out of problems in pure mathematics. The insights and language of differential topology, from which CT sprang, are foreign to most economists. The purpose of this paper is to explain how to use Abstract CT in economic modelling. To this end, we spell out a step‐by‐step procedure that can be understood without a knowledge of differential topology. The corollary advantage of our systematic procedure is that it brings into sharp focus the limited relevance of CT for economic modelling. The paper is developed in four stages. The first stage provides a gentle introduction to the key mathematical concepts for readers new to CT. The second stage consists of a brief description of the structure of economic modelling. In the third stage, a procedure about how to use CT in economic modelling is spelled out. The last stage summarises the main ideas of CT and points out the snags that a modeller will inevitably encounter when applying CT to economics.

Suggested Citation

  • Eduardo Pol, 2024. "Catastrophe theory and economic modelling at the back of an envelope," Australian Economic Papers, Wiley Blackwell, vol. 63(1), pages 16-35, March.
    • Handle: RePEc:bla:ausecp:v:63:y:2024:i:1:p:16-35
    DOI: 10.1111/1467-8454.12292
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8454.12292
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8454.12292?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bonanno, Giacomo, 1987. "Monopoly Equilibria and Catastrophe Theory," Australian Economic Papers, Wiley Blackwell, vol. 26(49), pages 197-215, December.
    2. Pol, Eduardo, 1993. "Theoretical Economics and Catastrophe Theory: An Appraisal," Australian Economic Papers, Wiley Blackwell, vol. 32(61), pages 258-271, December.
    3. Fischer, Edwin O & Jammernegg, Werner, 1986. "Empirical Investigation of a Catastrophe Theory Extension of the Phillips Curve," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 9-17, February.
    4. Varian, Hal R, 1979. "Catastrophe Theory and the Business Cycle," Economic Inquiry, Western Economic Association International, vol. 17(1), pages 14-28, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Markus Brueckner, 2024. "Introduction to special issue: The economics of catastrophes," Australian Economic Papers, Wiley Blackwell, vol. 63(1), pages 1-4, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rosser Jr., J. Barkley, 2007. "The rise and fall of catastrophe theory applications in economics: Was the baby thrown out with the bathwater?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3255-3280, October.
    2. Bolgorian, Meysam, 2019. "Can a cusp catastrophe model describe the effect of sanctions on exchange rates?," Economics Discussion Papers 2019-2, Kiel Institute for the World Economy (IfW Kiel).
    3. Lange Rense & Oliva Terence A. & McDade Sean R., 2000. "An Algorithm for Estimating Multivariate Catastrophe Models: GEMCAT II," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 4(3), pages 1-34, October.
    4. Dennis Wesselbaum, 2017. "Catastrophe theory and the financial crisis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 376-391, September.
    5. Lange, Rense & McDade, Sean & Oliva, Terence A., 2001. "Technological choice and network externalities: a catastrophe model analysis of firm software adoption for competing operating systems," Structural Change and Economic Dynamics, Elsevier, vol. 12(1), pages 29-57, March.
    6. W Barentsen & P Nijkamp, 1988. "Nonlinear Dynamic Modelling of Spatial Interactions," Environment and Planning B, , vol. 15(4), pages 433-446, December.
    7. Lokshin Michael & Ravallion Martin, 2004. "Household Income Dynamics in Two Transition Economies," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(3), pages 1-33, September.
    8. Michael Rauscher, 1992. "Cartel instability and periodic price shocks," Journal of Economics, Springer, vol. 55(2), pages 209-219, June.
    9. Jalan, Jyotsna & Ravallion, Martin, 2001. "Household income dynamics in rural China," Policy Research Working Paper Series 2706, The World Bank.
    10. Murakami, Hiroki, 2018. "Existence and uniqueness of growth cycles in post Keynesian systems," Economic Modelling, Elsevier, vol. 75(C), pages 293-304.
    11. Gerß, Wolfgang, 2008. "Das Ende der DDR als konsequente mathematische Katastrophe," Duisburger Beiträge zur soziologischen Forschung 1/2008, University of Duisburg-Essen, Institute of Sociology.
    12. Nijkamp, Peter & Reggiani, Aura, 1995. "Non-linear evolution of dynamic spatial systems. The relevance of chaos and ecologically-based models," Regional Science and Urban Economics, Elsevier, vol. 25(2), pages 183-210, April.
    13. Guy Laroque, 1991. "Inventories and the Fixprice Method," International Economic Association Series, in: Lionel W. McKenzie & Stefano Zamagni (ed.), Value and Capital: Fifty Years Later, chapter 8, pages 205-231, Palgrave Macmillan.
    14. Devine, James G., 2011. "The great moderation and "falling off a cliff": Neo-Kaldorian dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 366-373, May.
    15. Lucian Liviu Albu, 2010. "From Standard Macroeconomics To Non-Linear Macroeconomics," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 5(1), pages 5-33, april.
    16. Hiroki Murakami, 2019. "A note on the “unique” business cycle in the Keynesian theory," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 384-404, July.
    17. Hiroki Murakami, 2016. "Alternative monetary policies and economic stability in a medium-term Keynesian model," Evolutionary and Institutional Economics Review, Springer, vol. 13(2), pages 323-362, December.
    18. Albu, Lucian-Liviu, 2006. "Non-linear models: applications in economics," MPRA Paper 3100, University Library of Munich, Germany.
    19. Jozef Barunik & Jiri Kukacka, 2015. "Realizing stock market crashes: stochastic cusp catastrophe model of returns under time-varying volatility," Quantitative Finance, Taylor & Francis Journals, vol. 15(6), pages 959-973, June.
    20. Willi Semmler & Fabio Della Rossa & Giuseppe Orlando & Gabriel R. Padro Rosario & Levent Kockesen, 2023. "Endogenous Economic Resilience, Loss of Resilience, Persistent Cycles, Multiple Attractors, and Disruptive Contractions," Working Papers 2309, New School for Social Research, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausecp:v:63:y:2024:i:1:p:16-35. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.