From: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Newsgroups: misc.headlines,talk.politics.misc,alt.activism,sci.econ
Subject: Re: Boom Boom Boom Boom :)
Date: 26 Aug 92 17:49:46 GMT
Reply-To: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Distribution: usa
Organization: Pyramid Technologies, Mt. View, California.

In article <1992Aug26.040745.3040@pony.Ingres.COM>, garrett@Ingres.COM
(QUOTE OF THE YEAR) writes:
|> 
|> This isn't meant as a flame, but I seem to remember that after everyone
|> one these "boom" periods there was a severe recession. 
|> 
|> 1920's	followed by the 30's.
|> 64-69   followed by stagflation in the 70's (I remember a bad recession
|> 					in 73-74, but I think there was 
|> 					also one before then)
|> 83-89	followed by the present recession.
|> I'm not sure of the exact date, but there was a depression in the
|> 1890's as well.
|> 
|> Does anyone have a theory on this?
|> 
|> -Garrett

Yes.  It's called the "business cycle," a corollary to a more general
understanding of the action-reaction of forces known as "karma." The
higher the highs, the lower the lows.  Stupendous man is simply addicted
to the highs and denies the lows.  Something akin to ol' Ron himself.
Classic behaviours associated with growing up in alcoholic families.
Classic.  Reagan sold the notion of living outside of karma (consequences
of action) to a whole nation of individuals only too eager to hear it.

Given a relatively fixed population P, GDP(P) will expand indefinitely
only if P is indefinately consuming more.  In other words, economic
growth is the increased production which arises to meet increased
consumption.  If there is no continuing increase in demand then the
increase in production will become inventory, and production will begin
to drop off until inventory is depleted.  Production dropping off is
the end of the growth cycle.

The underlying micro-economic model is simply that human beings are
greedy little consumers whose happiness increases linearly with 
consumption.  The truth is there is a limited relationship between
human satisfaction and material consumption and many forms of consumption
cause economic 'indigestion' which result in a decrease in demand. 
Secondly, since the consumer is the worker-bee, he eventually figures 
out that the has to pay for his indulgences, and therefore makes a
sane act which is to decrease spending.  I think that its classic 
system theory to predict overeaction (stop spending) when faced with the
consequences of having greatly overspent, rather than to simply reduce
spending by a little bit.  In other words, the same consciousness that
wanted instant gratification now wants instant relief from the
consequences.  Consumers just slammed on the breaks when it became clear
to them what
had happened.

There are artificial stimulants to demand, such as "tax cuts" and 
commercial advertising.  These are efforts to 'entice' consumers to
consume more, and can in the short term produce some immediate effects.
But in the long term, sustained growth (consumption) of a relatively
fixed population of people can only occur if the population permanently
practices something equivalent to economic bolemia.

(There are secondary factors as well.  There are demographic "waves" in
 the population.  The baby-boomers just moved through.  Now there's 
something of a trough.  Also, the economy has become more service-based.
There is no inventory of services.  Service supply drops off immediately
without demand.  You can't produce a massage and store it in inventory.)

Paul Collacchi

Newsgroups: misc.headlines,talk.politics.misc,alt.activism,sci.econ