Increasing Returns

[william the wie]

A lot of increasing returns can be explained by network economies:
([N+1]/2)N and (N-1)N/2 are the most common equations so almost all networks can be approximated as N(N/2) or exponential growth of returns. This helps explain why the third most populous country, the US, is the largest economically. The Chinese economy is second largest and China's demographic history of die-offs:

Mongol, Manchu and Japanese invasions; Bubonic plague; and both Taiping and Maoist civil wars. All six created negative population growth.

Europe prior to the War of Independence also experienced Plague dieoff negative population growth. But the Syphilis pandemic 1494-1943 was concurrent with the spread of American foods to Europe so negative population growth was not experienced. However the response to Syphilis was the same as to the labor shortage caused by the plague: inventing labor substitutes such as the printing press (plague) and steam engine (syphilis).

So, I disagree with Kimura about the Chicken and Egg alternative he offered me by link on another thread.
[MENTION=41066]Kimura[/MENTION], [MENTION=20854]Zander[/MENTION], [MENTION=2926]Toro[/MENTION]

 

[Kimura]

For the sake of this discussion, minus my cursory reading of some papers on behavioral economics and network economics, where do you want this discussion to go?

 

[william the wie]

I think the exponential growthrate of networks is still taking everyone by surprise. For example, I tend to agree with the men and women on the spot who tended to attribute the great depression to the radio pool even though their explanation was incomplete:

The wet cell technology available 1910-30 for off-grid radio was a health hazard to children and pets. That made it the killer app for electrification.

RCA was 75% owned by three appliance makers with 25% issued to the public as a tracking stock. (The three volume history of early radio "Empire of the Air" is my source.)

So Radio was driving the spread of both electricity and fossil fuels because ovens came in three varieties: electric, gas and insanely expensive. The production and utility of household of ovens and similar "magical" appliances drove the electrification boom until 1927

Radio advertising in turn drove the secondary booms in cars, films and planes.

So, I consider the dissolution of the Radio Pool in July 1929, the people who manipulated the 25% of RCA stock available to the public, to be responsible for the lack of short interest in Aug.-Oct 1929. The effect of radio advertising in driving electrical, road, airport, movie and fossil fuel networks to saturation is rarely mentioned as causative in economic histories of the Great Depression and I believe this to be a profound error.

I have not seen this type of analysis in mainstream theories of the Great Depression as even a secondary cause of the misery.