Comments on “Constant gain learning and business cycles”

There are two contracting viewpoints concerning the explanation of observed fluctuations in economics. According to the first view the main source of fluctuations is to be found in exogenous, random shocks to fundamentals. According to the second view a significant part of observed fluctuations is caused by non-linear economic laws. Even in the absence of any external shocks, non-linear market laws can generate endogenous business fluctuations. The discovery of chaotic, seemingly random looking dynamical behavior in simple deterministic models sheds important new light on this debate. In order to detect non-linear structures in economic data a certain number of tests, some based on chaos theory, have been developed. The model by Cellarier, with boundedly rational households, is an excellent contribution to this literature.