Dollars and Jens
Tuesday, May 15, 2007
ce qu'on ne voit pas
During bubbles, the competition created by excess capacity — too many e-retailers, too many railroads competing for too few customers — inevitably leads to vicious price competition. (Score one for consumers). Post-pop, the infrastructure - housing and telegraph wire, fiber-optic cable and railroads - doesn't get plowed under. It gets reused, and quickly, by entrepreneurs with new business plans, lower cost bases and better capital structures.Is the whole book premised on the broken window fallacy?
All that cheap infrastructure being used after the pop cost a lot of money — more, in fact, than it was worth; the resources that were put into building it could otherwise have been put into building something more valuable. That it's not all lost doesn't make it a net positive; I'd file it under "the world is imperfect, and this sort of thing is probably less bad than what happens if we try a coordinated market structure change to protect against it".
