By Reflections | March 24, 2011 at 05:10 PM EDT |
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A central tenet of economics is that markets tend toward equilibrium, which is similar to what is known as an evenly rotating economy in the Austrian school. A perfectly evenly rotating economy is one in which all demands are perfectly anticipated by suppliers and there are no new products or services.
Of course, in the ordinary course of events, some sort of disruption always causes new variations from the evenly rotating economy before the economy reaches this state. We also know that changes in the money supply by a central bank and increasing regulations can drive an economy out of equilibrium for extended periods of time but there seem to be market forces that can act in a similar way.
How is it that Google became the most used search engine? How did Facebook become more popular than MySpace? There seem to be some phenomena that drive markets out of equilibrium that aren't accounted for in current economics literature.
This is the first of many topics that I am investigating for my book.