https://doctorow.medium.com/after-inflation-the-whip-crack-2a9c228022e
"There’s a school of economics that likens the economy to a computer, one that
we all power. Every time we buy something — or walk away from an offer — we
feed data to the computer, which transmits this price- and demand-information
from consumers to producers to financiers, so that demand can be met with
supply.
The proponents of this theory admit that this “computer” produces a lot of
waste as it buds off different solutions — new businesses, products and
services — and then prunes away the ones that fail, but, they say, this waste
is far less than the waste we’d experience if we shut the “computer” down and
switched to a “planned economy.”
As Leigh Phillips and Michal Rozworski argue in their crucial, slim 2019 book
“The People’s Republic of Walmart,” any large, complex economy tends toward
high degrees of integration between firms, because the “computer” of the
economy of buyers and sellers is balky, slow and often catastrophically
unrealiable:
https://memex.craphound.com/2019/03/05/the-peoples-republic-of-walmart-how-late-stage-capitalism-gives-way-to-early-stage-fully-automated-luxury-communism/
Here’s one way that the economy-computer fails: the “bullwhip effect.” That’s
when a retailer experiences a rush of sales for a product and sells out, and so
places a bigger order. The distributor notices that their retailers are raising
their orders, so they place a bigger order with the wholesaler. The wholesaler
then boosts their order with the manufacturer, who places bigger orders with
their material suppliers and so on:
https://en.wikipedia.org/wiki/Bullwhip_effect
Just as the little wave at the start of a bullwhip turns into a succession of
bigger waves, so that a simple twitch of the wrist can cause the tip of the
whip to break the sound-barrier, so too can a transient increase in demand
ripple up the supply chain, creating vast overproduction of goods.
This, in turn, leads to the other side of the bullwhip effect: a series of
overcorrections that produces shortages. The retailer now has a shelf full of
whatever their customers briefly wanted. But the surge is over, so those
products just sit on the shelf. The retailer doesn’t just cut their order to
the previous, normal level — they actually reduce their typical order, because
they’re overstocked.
Once again, this effect ripples and expands through the supply chain. The
distributor is oversupplied, so they cut orders to the wholesaler. The
wholesaler cuts orders to the manufacturer. The manufacturer cancels its orders
with its material suppliers — and now a bunch of miners or loggers get laid
off."
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
