Friday, February 14, 2014

Roundaboutness and economic shocks

Relating a value added chain to the concept of disequilibrium.

The rule is fairly simple. A shock to demand reduces the variety of goods, and the value chain is too long , vertically, for the width.  If the variety of goods suddenly increase, the supply chain must increase in length. If the consumers are not a balance bell curve, approximately, then the chain is skewed to one side.

An increasing large Gini is really a severe skew, and a short value added chain.

The distribution chain modeled for suppliers should be the dual of the modeled for demanders.  In a balanced economy, all the distribution chains, seen as finite graphs, should be the same shape and size.

No comments: