Economic bios

Abstract

Purpose

The purpose of this paper is to examine the possibility of biotic patterns. In economics, markets are thought to tend to equilibrium with random and unpredictable deviations. However, an explosion of empirical work searching for possible chaos show an enormous amount of unexplained nonlinear structure. These observations led the authors to examine the possibility of biotic patterns in economics.

Design/methodology/approach

Bios is defined as a causally generated creative process. It is the causal counterpart to random walk, just as chaos is the causal equivalent to randomness. Economic data consisting of time series from several categories, including banking, employment and population, and gross domestic product and components, were studied for diversification, recurrence, and predictability patterns characteristic of bios. Diversification was quantified as increased variance with embedding, recurrences were measured using newly developed computer programs, and predictability was measured with a nonlinear prediction method.

Findings

Dynamic analyses of the data show: episodic patterning and asymmetric statistical distribution, typical of bios; increase in variance with embedding (diversification), less recurrence than shuffled copies of the data (novelty), demonstrating creativity; consecutive recurrence; and patterning in the series of differences, indicating non‐random causation.

Originality/value

The demonstration of bios in empirical data indicates that the economy is non‐stationary, causal, and creative. This contradicts the notion that markets regulate themselves and tend to equilibrium, and the characterization of market variation as random or chaotic. Further economic crises may be avoided by acknowledging that financial markets are not bound within limits and can be modified into new forms by human action.

Citation

Sabelli, H. and Kovacevic, L. (2011), "Economic bios", Kybernetes, Vol. 40 No. 1/2, pp. 251-261. https://doi.org/10.1108/03684921111118022