The aim of this post is to draw the attention of economists to some results obtained for ecological systems, because they may provide insights into how economic systems work. In a paper published a few years ago (Klaus Rohde and Peter P. Rohde 2001. Fuzzy chaos: reduced chaos in the combined dynamics of several independently chaotic populations. American Naturalist 158, 553-556) we have shown that chaos in populations is reduced in metapopulations consisting of several largely independent subpopulations with different reproductive rates. Examples are given in figures 1 and 2. Population sizes x are plotted as fractions of carrying capacities (0-1) at different reproductive rates r of the population. Figure 1 shows a bifurcation diagram for a single population; the insets show population sizes plotted against time for a few selected reproductive rates. Note that chaotic fluctuations in population size begin at r=3.57. Figure 2 shows a bifurcation diagram for a metapopulation consisting of 5000 subpopulations, illustrated only for reproductive rates of r=3.50 and larger. Note that there still are chaotic fluctuations, but the width of the fluctuations is significantly reduced.
Figure 2: Bifurcation diagram for a metapopulation consisting of 5000 subpopulations.
This may suggest that chaotic fluctuations are much stronger in single large economies, for example due to globalisation, than in the world economy consisting of national economies that are largely separated.
I invite comments to point out any errors in the argument.