To: michael r potter who wrote (36532 ) 1/4/2000 3:04:00 PM From: Jacob Snyder Respond to of 99985
Is the business cycle dead? Yes. The business cycle is dead, because it was rooted in a lack of timely information, and slow response times. It was a technological problem, and has been solved by technological advances in computers/telecom/transportation. In the Old Economy, info about what the end-consumer wanted could take years to get back to the original producer. And the data never was very detailed. Then, the producer would have to guess what products the consumer would want years in the future. It took that long to get the capital, set up the manufacturing system, train the workers, distribute the product. Inevitably, managers would guess wrong, and that is what produced the cyclic oversupply/undersupply of the business cycle. Now, if they spend enough on computers and fiberoptic cables, managers can know in real-time (and in great detail) what customers are buying. And, they can institute just-in-time flexible manufacturing, to adjust (again, in real-time) to what the customer wants. No more oversupply/undersupply. Or: No, the business cycle is not dead, because it is rooted in the way the human mind works, and that hasn't changed. Humans are herd animals. We also tend to think that the recent past predicts the future better than long-term patterns. These two flaws in our brains create the periodic overshoots in optimism and pessimism, which in turn cause the oversupply/undersupply events. New technology just causes information overload. The truth is probably a messy mix of those two answers. re: "this is a speculative mania fueled by a seed of truth-That we are in a a tech., productivity revolution, but that human greed emotion has taken it way past economic justification." Well said.