The ‘Drop of Honey Effect’. A Note on Chaos in Economics

Manuel Alberto M. Ferreira, José António Filipe
International Journal of Finance, Insurance and Risk Management, Volume 2, Issue 4, 350, 2012
DOI: 10.35808/ijfirm/55


Relationships in non-linear systems are unstable. Considering that, chaos theory aims to understand and to explain the unpredictable aspects of nature, social life, uncertainties, nonlinearities, disorders and confusion. Small differences in initial conditions - such as those due to rounding errors in numerical computation – may perform diverging outcomes tracking to systems’ chaotic behaviour. In these circumstances, long-term predictions become impossible in general. A brilliant metaphor on this is the so-called butterfly effect, about the way how the “flapping of the wings of a butterfly” may cause huge phenomena either they are physical, atmospheric or social. In this work, the drop of honey effect metaphor is proposed for representing this kind of butterfly effect for chaos in social phenomena, in particular in economics and politics.

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