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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Don Lloyd who wrote (9929)9/20/2001 12:36:45 PM
From: Ilaine  Read Replies (2) of 74559
 
Hi Don - one of the arguments I've read recently is that prior to the Industrial Revolution, there were no "business cycles." There were occasional "booms and busts", e.g., tulip mania and the South Sea Bubble. The concept that aggregate output could create an imbalance between aggregate supply and aggregate demand which would lead inevitably to a self-correction is recent.

Following up on your argument, is it possible that what we perceive as booms and busts are coincidences?

Using a traffic jam as an example - each person is driving to work for his/her own reason. My reason causes me to be on the road at the same time you are, but my reason didn't cause you to be on the road. You are on the road for your own reason. Too many people trying to use the road at the same time can mean that we all have to slow down because there isn't enough road for all the cars at once, but the reason for the jam is a large number of coincidental uses of the road. No causal connection.

Further - you know how a jam caused by a wreck will continue even after the wreck is cleared away? It's very mysterious - everyone slows down at once and then speeds up again, and one asks "what was that about?" but if you don't see broken glass or a smashed car on the side of the road there's no explanation. I don't know what that's called. Fractals?

Is it possible that what we perceive as busts are caused by a similar phenomenon?
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