Do nonlinear dynamics in economics amount to a Kuhnian paradigm shift?

ABSTRACT

Much empirical analysis and econometric work recognizes that there are nonlinearities, regime shifts or structural breaks, asymmetric adjustment costs, irreversibilities and lagged dependencies. Hence, empirical work has already transcended neoclassical economics. Some progress has also been made in modeling endogenously generated cyclical growth and fluctuations. All this is inconsistent with neoclassical general equilibrium. Hence there is growing evidence of Kuhnian anomalies. It therefore follows that there is a Kuhnian crisis in economics and further research in nonlinear dynamics and complexity can only increase the Kuhnian anomalies. This crisis can only deepen. However, there is an ideological commitment to general equilibrium that justifies "free enterprise" with only minimal state intervention that may still sustain neoclassical economics despite the growing evidence of Kuhnian anomalies. Thus, orthodox textbook theory continues to ignore this fact and static neoclassical theory remains a dogma with no apparent reformulation to replace it.