|Abstract||Over the last several decades the view that economic reality is somehow fundamentally complex has increasingly taken hold among economists, not only those focused on abstract theory but even policymakers as well (Greenspan, 2004). Consequently such economists have been forced to wrestle with the problem not only of how to forecast, which has always been difficult, but even how to understand the apparently most simple economic phenomena in principle as well. More to the point, even how to think about how to understand such phenomena has become a serious challenge. In short, economists increasingly must grapple with fundamental problems of epistemology, how to know what they know in a complex economic reality. This paper will consider three foundational aspects of this problem. The first involves to what extent the source of the problem is endogenous to nonlinear dynamics. The second involves to what extent it is logical and computational. The third will consider whether or not the epistemological problem is really an ontological problem. The problem of nonlinear dynamics and epistemology is most clearly seen in relation to chaotic dynamics, particularly the problem of sensitive dependence on initial conditions, also known popularly as the “butterfly effect.” If minute changes in initial conditions, either of parameter values controlling a system or of initial starting values, can lead to very large changes in ultimate outcomes of a system, then it may essentially require an infinite exactness of knowledge to completely understand the system. Likewise such problems as fractality of basin boundaries in systems with multiple basins..|
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