Fractal Price Elasticity of Supply

 It's Sunday morning, a time I like to share with you, but I've been thinking about recently.

Well, if I were to do that and its totality, it'll be way too much. I have my book I'm working on—the cosmology problem—and the topic of this post: price elasticity of supply and the fracture.

One of my early insights into the fractal was elasticity. I teach economics and have just gone through the section on elasticity, which I find absolutely fascinating and an absolute insight into reality. It is a place where economics becomes physics, and it is a property of everything, revealed in economics: elasticity, namely, the price elasticity of demand (PED) and the price elasticity of supply (PES).

My 2011 blog entry on this topic.

For years, I have been trying to make this work, make this correspond. If the economy is a fractal, then elasticity should be explained by the fractal. I find myself at the risk of trying to make this fit; confirmation bias.

But for some reason, this year I've had some clarity of thought, and it came to me very quickly that, with respect to the supply curve, the elasticity along the supply curve must run from left to right: inelastic at low prices and elastic at high prices. Now this corresponds with what I've experienced in life when it comes to selling things. At low prices, I am not interested in selling; as prices rise, I become more enthusiastic. That makes sense and corresponds to the understanding I get when I do a search.

This interpretation is not how I have had it in the past; instead, I have had the opposite, elastic to inelastic, the same as the Keynesian Aggregate Supply Curve. This was my thinking at the time: that as I produce more bits on the snowflake, it comes at a greater cost, and I am unable to produce any more. Put another way, to produce comes at a cost, and it is easier to produce at the early stages. Hence, an inelastic-to-elastic curve.

Yesterday, it occurred to me that if I were given an incentive —a price to produce —then I would produce more, I would iterate the curve more, and therefore more would be produced, and this corresponds with reality. The more I am paid, the more I produce. This will result in an inelastic-to-elastic supply curve.

As a sidenote, the Keynesian Aggregate Supply Curve is wrong. I think he's conflicted with the understanding of elasticity. Sure, at low-capacity factories can produce more (at any price), but more importantly, they won't produce more at low prices. My point is that the low prices dominate the actual shape of the curve. It is not perfectly elastic at low prices, but it is inelastic. 

Anyway, this post was more of a note for me than anything. A marker in my thinking. Someday I'll get around to finishing my fractal theory of the economy. There could be a book in it.

 Have a nice Sunday