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To: reaper who wrote (225172)	3/4/2003 10:24:08 AM
From: yard_man	Read Replies (2) \| Respond to of 436258

speaking of foresight <g> biz.yahoo.com

To: reaper who wrote (225172)	3/4/2003 10:31:35 AM
From: Perspective	Read Replies (2) \| Respond to of 436258

Capitalist pricing mechanisms are prone to instability, as you note. It can be modelled as a simple linear control system: you apply a stimulus (price step), the parties respond by launching projects to increase capacity. However, the lag between project launch and production is long enough that more decisions to add capacity are made than is necessary. By the time enough production comes on line to lower prices far enough to stop new project launches, enough capacity additions have been started that the price undershoots. (Note that the longer the lag between the decision to add capacity and the realization of that capacity, the more unstable the system becomes. That's why semiconductor manufacturing has such deep cycles.) Now add humans to the mix, trying to guess what the other parties are doing, and you end up with a time-variable system. The players think they learned not to add the capacity the market needs in the most recent cycle, so they delay and the price continues to rise. How the hell do you model that? Dunno. If we had good human behavioral models, we'd probably be rich... BC