PSST and Fragility
By Arnold Kling
Ted, in a comment on this post, asks a number of good questions.
How similar is your idea of PSST to David Levine’s Production Chains?
Thanks for point out this paper. There is a lot of overlap, in that we both see production processes as increasingly complex. However, Levine argues that this makes the economy more fragile, and I am not so sure that I agree. An individual production chain may become more fragile. However, there are now many more production chains at work, so that the economy as a whole could be less fragile.
Think of production chains as if they were supply routes (or routes for Internet packets, if that analogy helps). Any long route that has many hops may seem fragile, but that only holds for that given route. There may (or may not) be lots of alternative routes. I think that in most situations, there are alternative routes, so that the economy is not so fragile. However, recent events have exposed some fragility.
I respond to Ted’s other questions in the comment thread on the original post.