Chaos Theory, Practical Prediction for the Eradication of Economic Tragedy

When we refer to Wikipedia, we find that in mathematics, Chaos Theory describes the behavior of certain dynamical systems – that is, systems whose states evolve with time – that may exhibit dynamics that are highly sensitive to initial conditions (popularly referred to as the butterfly effect). As a result of this sensitivity, which manifests itself as an exponential growth of perturbations in the initial conditions, the behavior of chaotic systems appears to be random. This happens even though these systems are deterministic, meaning that their future dynamics are fully defined by their initial conditions, with no random elements involved. This behavior is known as deterministic chaos, or simply chaos. Wiki further explains, chaotic behavior is also observed in natural systems, such as the weather. This may be explained by a chaos-theoretical analysis of a mathematical model of such a system, embodying the laws of physics that are relevant for the natural system.
Chaotic behavior in nature has had an undeniable influence on us well before we began exercising our experimental knowledge. By the way, we are still in the experimental stages of this theory. For all time, we have endured the actions and tricky behavior of certain dynamical systems, consider the first huddle of humans in a warm dry cave during a sudden sweeping storm. Chaotic behavior has been a favorite topic among mathematicians, scientists, physicists and engineers. The need for extreme weather prediction has pushed the idea of chaos theory into the forefront of important evaluation with the use of modeling for simulation. The study of chaos theory doesn't end there, the implications are slightly generic and could, with exploration, fit into many working or non-working systems for its priceless evaluation properties. Chaos theory works and does not work, this creates an obvious interest that will not, as I see it, end any time soon.
Can you imagine how Henri Poincaré held his breath? Mid-calculation discovery always catches the breath. In 1890, while studying the three-body problem, he found that there can be orbits which are non-periodic, and yet not forever increasing nor approaching a fixed point. Then, in 1898 Jacques Hadamard published an influential study of the chaotic motion of a free particle gliding frictionlessly on a surface of constant negative curvature. In the system studied, "Hadamard's billiards," Hadamard was able to show that all trajectories are unstable in that all particle trajectories diverge exponentially from one another, with a positive Lyapunov exponent. These men were experimenting, living and teaching at the leading edge of something new and exciting. How wondrous is it, that today's scientific leaders still consider chaos theory something new and exciting?
What I find most important today within the wordy Wiki wisdom file on chaos theory is a link to Economic Bubble which is sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, or a speculative mania. While some economists deny that bubbles occur, the cause of bubbles remains a challenge to those who are convinced that asset prices often deviate strongly from intrinsic values. I am caught by my brain and its 'wait a minute' trigger. Finding it unbearable, I give in to the thought process of economic struggle and the ability to predict chaotic behavior within reason while considering the 'bubble'. I am not the only one, of course.
Most recently, it has been suggested that bubbles might ultimately be caused by processes of price coordination or emerging social norms. Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst. Prime examples of this Aftermath Bubble would be the Great Depression and the Panic of 1837. I fear the bubbles we will be studying in the aftermath of recent economic turmoil will put those bubbles to shame. Back to the definition of bursting bubbles; both the boom and the bust phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic bubble can fluctuate erratically, and become impossible to predict from supply and demand alone.
Prediction is key here, obviously. Clear evidence that we can not predict the future of a system which includes chaotic behaviors does not mean that we may not eventually be able to somewhat predict economic fluctuation in ways that will allow us to strengthen the otherwise hidden weakness in a radical bubble. That is, once the bubbles are actually seen as a real occurrence. An after the fact evaluation of the floor dropping out from under us, is just not enough to keep us within a stable structured financial system in spite of the determining 'terrible' factors.
I suspect, there is more to the bubble theory than simple inflation or a rise in fundamental values. Maybe, the creation of bubbles are not just from the actions of 'the greater fools' pushing the price of an overvalued asset, extrapolation for history's sake or herding for the sake of the market trend. It would not take much for me to believe that there are factors at play within our economic world that have yet to be discovered. I am also sure that once we do find ways to measure, model and simulate these economic factors, we will find that all along, they were as evident as a hurricane's projected path from two days out.
Chaos Theory as it relates to the prediction of economic bubbles with a real risk of bursting will keep me in a thought pattern reminiscent of synergy, entropy and the need for personal evolution, all day. For my personal sake, I hope the thought remains longer. We think in this realm traditionally, with the hopes of saving lives. The ability to predict tornadoes, hurricanes or worse, not only saves the lives of gathered citizens, it gives those citizens evidence of their value.
Practical prediction for the eradication of economic tragedy. It is not a dream, it is an idea bred from severe loss and that makes all the difference. http://en.wikipedia.org/wiki/Chaos_theoryhttp://en.wikipedia.org/wiki/Economic_bubble

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