> One big risk here, or with any cyclically referenced benchmark, is runaway positive feedback. This can be exponential growth, oscillation, or exponentially growing oscillation.
Have we ever witnessed an exponentially growing oscillation in a large scale economic feedback loop like this before? I'd never really considered that concept for macroeconomics.
I'm sort of extrapolating from the very little I know of control theory and feedback systems. I've seen others mention that economics and control theory could benefit from collaboration.
Maybe the boom/bust business cycle, coupled with inflation, is exactly this phenomenon? Maybe social media frenzy is also a feedback phenomenon.
It’s not really a big risk, here. It’s hypothetical. A scare tactic to argue against increasing the minimum wage to even moderately adjust for for inflation and overall productivity growth (and cost of living growth).
It is very frustrating to have any kind of productive discussion when the slightest hint of anything unexpected is negatively labeled and associated with the entirety of some diametrically opposed position that was never actually raised.
I apologize. But it's frustrating when people express opposition to even a minimum wage level from the 1960s with sort of outlandish hypotheticals. There's a bunch of pretty good empirical research out there on the effects of minimum wage increases, and none of them suggest this sort of "exponential" increasing effect.
https://noahpinion.substack.com/p/why-15-minimum-wage-is-pre...
The thing is, you assumed what I believe. I'm actually in favor of higher minimum wages and indexing to costs. But the feedback-loop nature of the economic system, or any feedback system (where future output numbers of the system depend on previous outputs), must be acknowledged and accounted for, or else you will, mathematically, get exponential growth and/or oscillation.
I also have a lot of family who currently live just fine making less than $15/hr. Their employers (small businesses) would have to raise prices (or go out of business, or both), which would raise costs, which would raise the CoL index, which would raise future minimum wages in a feedback cycle, if there is not some compensating factor in how wages and prices are set.
Because then they would lose profits. If labor becomes more expensive, maximal profit would be found at producing less and charging more, but overall profit would decrease.
...you’re ignoring demand effects. Higher wages means more aggregate demand. Empirical research on minimum wage increases shows that this basically fully compensates for hypothetical disemployment effects.
Have we ever witnessed an exponentially growing oscillation in a large scale economic feedback loop like this before? I'd never really considered that concept for macroeconomics.