Chaos impact on economic systems

Chaos theory provides an interesting perspective into real-world applications that seems to counter conventional wisdom. For example, Capitalist economics is often criticized for its short-term focus, projecting forecasts on quarterly and annual clocks. Regardless of the knowledge and experience that goes into the forecasts, business leaders typically find themselves having to explain each quarter why performance did not meet projections while they adjust the next quarter's forecasts to current variables.

Seen from the perspective of dynamical systems theory, business leaders learn quickly that events cannot be predicted; they can only be explained--giving rise to the power of public relations. Chaos theory seems to say that the short--if even existent--predictability window in a dynamic competitive environment would require shorter projections and faster adjustments if the organization is to adapt successfully to and influence dynamically interacting factors in its internal and external environments.

The short predictability window in economics also seems to bring into question long-term forecasts, like annual forecasts in capitalist economies and the long-term plans that are the hallmark of Marxist economies. The capitalist has little influence over a dynamic free market, and must continuously adapt to survive. This proposes a counter-intuitive business strategy that might de-emphasize long-term strategic planning to refocus resources on developing flexible organizations and operations with redundant processes that allow the organization to more quickly respond to the environment.

On the other end of the economic spectrum, the Marxist economy generally must impose restrictive controls on people and processes to progress towards its long-term forecast; but chaos seems to find its way into the most controlled systems or even be caused by the control mechanisms imposed by the government.