Date: 24 Jun 2013

Simple nonlinear systems and navigating catastrophes

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Abstract

Tipping points are a common occurrence in complex adaptive systems. In such systems feedback dynamics strongly influence equilibrium points and they are one of the principal concerns of research in this area. Tipping points occur as small changes in system parameters result in disproportionately large changes in the global properties of the system. In order to show how tipping points might be managed we use the Maximum Entropy (MaxEnt) method developed by Jaynes to find the fixed points of an economic system in two different ways. In the first, economic agents optimise their choices based solely on their personal benefits. In the second they optimise the total benefits of the system, taking into account the effects of all agent’s actions. The effect is to move the game from a recently introduced dual localised Lagrangian problem to that of a single global Lagrangian. This leads to two distinctly different but related solutions where localised optimisation provides more flexibility than global optimisation. This added flexibility allows an economic system to be managed by adjusting the relationship between macro parameters, in this sense such manipulations provide for the possibility of “steering” an economy around potential disasters.