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The Role of Feedback in a Dynamically Stable Economic System

Klein, Burton H. (1980) The Role of Feedback in a Dynamically Stable Economic System. Social Science Working Paper, 305. California Institute of Technology , Pasadena, CA. (Unpublished)

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Generally speaking, the stimuli to various types of technological change are associated with two types of anticipated feedback: hidden hand feedback (the possibility of making higher profits) and hidden foot feedback (the possibility of being dislodged from a successful market by the process of creative destruction). In this paper it is argued that the most significant gains in productivity result from hidden foot rather than hidden hand feedback. Moreover, it is also argued that the disappearance of such feedback has not only contributed to the productivity slowdown, but also to providing the economy with a very unique kind of inflationary bias in which inflationary pressures are likely to reach their maximum strength when the economy is headed into a downturn. Finally, various measures to restore the dynamic stability of the economy are considered.

Item Type:Report or Paper (Working Paper)
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:305
Record Number:CaltechAUTHORS:20171012-165853793
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82335
Deposited By: Jacquelyn Bussone
Deposited On:16 Oct 2017 17:30
Last Modified:03 Oct 2019 18:53

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