Business cycle


In this post we treat, according to the biological laws of complexity, the short, medium and long cycles of evolution of machines that shape the economy. It is an example on how complexity can explain not only the how but also the why of the economic ecosystem, its cycles and the behavior of its agents.

Companies have no other existential objective beyond evolving and reproducing their products, whatever its collateral consequences might be. Owners of companies only think about the profits they obtain manufacturing machines and weapons. Yet those profits have a direct biological reading, since they increase when companies reproduce more machines. So the single goal of Company-mothers and their owners is to reproduce machines and take care of their ‘habitat’, the economic ecosystem, designing energy and information networks for them, (roads, pipes, electricity, digital and audiovisual information). Indeed, for Classic Economists that rule those companies and view technology and money as synonymous of human progress, all other considerations are secondary to that ‘business’ cycle of biological reproduction of the product. In that regard Microeconomics is the science that studies the internal structure of company-mothers as reproductive organisms composed of 2 species, human workers and machines, which reproduce through the business cycle of reproduction, sales and profits that activate the owners moved by greed.
Yet profits are only ‘the human abstract perspective’, the how not the why of those biological cycles that we can study according to the Ternary Principle:

– From the temporal perspective of its financial language, money, which directs the process .

– From the spatial perspective of the physical machines reproduced in the business cycle .
- From the organic perspective of its reproductive company-mothers, the key element of the economic ecosystem that embodies the biological, reproductive will of those machines.

The cycles of Machines and company-mothers.

The evolution and extinction of biological species follows the same cycles than the evolution of machines and extinction of human non-technological cultures, in 3 waves of 72 years.

Company-mothers are biologic organisms whose aim is to evolve, reproduce and sell its offspring of machines, using men as consumers and workers of those machines. Companies govern the world with money, invented for free in stocks and used to pay politicians that issue laws in favour of technology, to pay workers that reproduce machines and to design economic networks that substitute human networks of energy and information, creating a world modelled to the image and resemblance of machines

On that view the b.c. is not anthropomorphic but mchine-related.

The business cycle is the generational cycle of machines, which shows 3 clear ages: 

– Youth: the company-mother invests in I+D, evolving a new generation of machines. Profits are minimal (lower phase of the business cycle).– Maturity: the machine is a new product that  re=produces massively, increasing sales & profits. The business cycle is at its peak.– Old age: the machine becomes obsolete as a new, more evolved generation substitutes it.In the graph we see those 3 ages that become the 3 phases of a ‘business profit cycle’.

In the right graph, the 3 waves of machines’ population follow curves similar to any biological curve with a 1st age of discovery and evolution, which latter explodes in a radiation of reproductive profits in all industries and ends with the saturation of the ecosystem, signaled by the cracks of the stock-market. Then machines mutate into weapons and consume human beings, instead of being consumed by us. Yet as a new generation of machines and energy appear, the previous generation stops its growth. In this manner machines have evolved in 3 cycles changing the Earth ecosystem into the Metal-Earth. The result is the beginning of the 9th extinction of all forms of life , which today disappear at a rate 1000 times faster than in the age prior to the arrival of machines.

All those evolutionary cycles of Machines originate a series of economic cycles, analysed mathematically by abstract economists, which can be chained together, as it happens with the biological cycles of any organic system, creating 2 fundamental, cyclical economic chains:

The microeconomic cycle that relates the evolutionary, energetic and re=productive cycles of those machines and their companies  .

– And the macroeconomic cycle or Kondratieff cycle of economic activity that relates the generational and social cycles of machines’ species.The chains established between those bioeconomic cycles follow the same pattern of other micro and macro-organic chains, according to the different length of those cycles  :

– The fastest machine’s cycle is the information cycle, as in any other being. For example, the computer in which I write calculates million of cycles per second (Mhz.), showing an informative, capacity far superior to that of my brain, in spite of its defective design

- The second cycle in length is the energy cycle, developed by specialized transport machines. It is measured in revolutions per second and it arrives in high speed machines to a few tens of thousands of cycles per second.
- The third cycle in length is the cycle of reproduction of machines by their company-mothers. It is different for each machine but usually it lasts a period that extends from a few minutes to a few days. Nowadays it accelerates constantly as company-mothers evolve their re=productive systems; since in a Free economic ecosystem all the resources of our societies are dedicated to reproduce and evolve technology in increasingly automated factories where machines reproduce more evolved machines without the aid of man.

- The generational cycle of machines is the 4th cycle in length as each new, more evolved generation of machines displaces a previous one. It is called the product cycle and today lasts from 1 to 2 years. It is the fastest evolutionary cycle of any species on Earth. For example, men took hundreds of thousands of years to double their brain capacity, yet chips take only two years. This happens because men transfer palingenetically  , their formal evolution that took thousands of million years to machines that imitate our organic functions, from chip-brains to cranes-arms.
- Finallythe longest cycles of machines are the social cycles that extend through several generations and relate those machines with the historic and human cycles of the economy. Given the importance those cycles have for our species we will concentrate on their study.  

The business, short cycle.

Abstract micro-economics study the inner, individual cycles of evolution and reproduction of machines, the quanta of economic ecosystems, carried out by company-mothers, their reproductive and evolutionary organisms. We translate micro-economics to the energy and information cycles of evolution of organisms using a well established diagram, the graph of business cycles that shows the organic cycles of machines and company-mothers in an abstract form, using profits and sales, which are the evolutionary and reproductive parameters of machines:

-E:Production and sales mean the ‘re=production’ of machines, a spatial parameter of population.

– Exi: Profits is a variable dependant, both on the sales & costs of reproductionwhich diminish as a company evolves its means of production and the quality=evolution of the product. Thus profits depend on the evolution of machines, becoming its temporal parameter.

The business graphs of profits of company-mothers are organic graphs that show the reproduction and evolution of their products and machines that those companies sell to obtain profits, which are proportional to the reproductive and evolutionary ‘force’ of their products. 
The evolutionary quality of a machine, its population and quality (production, sales and profits), is shown in its X-value that increases each generation. Since each new generation a machine is extinguished and replaced by an evolved machine that has more energy or information.

The 3 phases of that curve are evident bio-logical ages:

Youth: The Company spends its ‘financial energy’ developing and creating the productProfits plummet in the age of discovery, the evolutionary age of any species, when the machine is mutating and needs the company’s protected environment.

Maturity: The business cycle reaches its max. sales in the reproductive age of each machine. And it has 2 lower curves of minimal profits in its young, research age and its old, obsolete age, when it is ‘on sale’. So the company works simultaneously in 3 generations, researching a new generation when the previous generation is in its zenith of sales as the top predator, more efficient machine the company produces. Then the higher expenses on I+D are compensated by the profits of the ‘present’ machine.
- 3rd, Old age: Max. information. The company diversifies the product and spends on marketing. If the industry manufactures a machine, the product becomes in this 3rd age a weapon sold to governments, increasing also the profits of the company (shown in the graph as a divergent 3rd age of the cycle).

– (- 1): Extinction: The product is taken out of the market when a new generation is ready.
The graph decomposes the cycle in 3 generations of machines, which are in most companies simultaneous, as 3 waves of blue, green and red light give white light. Hence most companies have, when they ad expenses and profits of 3 generations, a business cycle that shows a smooth curve of profits tangent to those 3 curves.

The  long cycle. 

In the graph, the aggregation of all business cycles enlarged to the entire economic ecosystem and its main ‘phyla’ of machines creates the 3 Kondratieff stock-cycles of  the Industrial R=evolution: The cycle of trains (XIX C.) that ended in the 1857 rail crash; the cycle of cars and radios (XX C.) that ended in the 29 crash; and the cycle of electronic machines (XXI C.), shown in the graph, that ended in the 2000 NASDAQ crash.

In the left side, we enlarge  the 2nd, 29 crash and the 3rd crash in which we live.  Both  are mimetic and similar to any other Crash of over-population of a biological species (top center curve). Since those crashes happen when the consumption age of max. reproduction and profits ends by saturation of the market. Then companies mutate the machine that enters its 3rd age as a weapon that consumes humans in wars, perfectly sold to the public by political lobbyism, informative machines of mass-media propaganda and a suitable, well-located enemy.

Thus the business cycle is a generational, biological cycle with 3 ages, similar to all other evolutionary cycles. Those ‘micro-cycles’ of every company that discovers, evolves and reproduces a product as a consumption machine or a weapon, are the business cycles of microeconomics that aggregate in longer macro-cycles. Indeed, stocks are ‘social organisms of companies’ that aggregate the production of all companies in space and all the generations in time of a certain ‘machine’. Thus the sum of all the individual business cycles of company-mothers become the stock-market cycle that studies the population and evolution (sales and profits) of a machine’ species from birth to extinction, reproduced by an entire ‘sector’ of companies.
Further on, we can aggregate all those stock cycles of all industries, creating an overall cycle for the entire planetary economic ecosystem. In abstract economics those cycles are called the Kondratieff cycles of economic activity, which study the overall evolution of all companies and machines. Thus the business cycle is the quantic version of the stock market cycle, which aggregates in time and space all the business cycles; while the stock market cycle is the quantic version of the Kondratieff cycle, which aggregates all the companies in space and all the generational cycles in time of a given product. The results are the 3 great Stock Cycles of history or ‘Kondratieff’ cycles of industrial and financial activity :

– XIX C: Max. E: The age of steam and physical energy developed the market through an age of low profits (invention age, 1820-30s), massive growth and speculation in the market (reproductive age, 1840-50s) and a final economic crisis of saturation of markets (the railroad crash of 1857), followed by an age of wars in which trains and steamers conquered colonial empires.

– XX C.: E=i: The age of oil-based, electro-chemical engines developed the stock-market through an age of low profits (invention age, 1870-80s), massive growth (reproductive age, 1890s-1920s) and saturation crash (1929 crash of radios and car industries), followed by II W.W.: in which cars became tanks and planes bombers.

– XXI C.: Max. i: Finally the age of electronic and solar energies developed electronic machines in a 1st age of minimal growth (1960s-70s), an age of massive reproduction of TVs and Pcs (1980s-90s) that lasted till the end of the century when the NASDAQ stock crash of 2001 made companies invest in smart weapons and security industries.
In the graph we study in more detail the 3rd electronic cycle in its main Stock Market, the New York market divided into an electronic stock, NASDAQ, and the traditional NYSE. If we compare its curve between the II and III Kondratieff crashes (left side) with a standard biological curve of populations, both are parallel. Since the curve of reproduction sales and profits of electronic machines shows the same phases of birth (discovery), re=production, saturation (crash) and diversification (into weapons) of any top predator species. In the case of machines the ‘habitat’ of the species is the economic ecosystem in which the machine substitutes a human organ as a consumption machine or a tool. Then, when the economic ecosystem is saturated, the machine mutates into a weapon and wars happen.

So we distinguish for each key machine of the electronic cycle, the mainframe, the mobile machine and in the future, the robot, a sub-curve of populations of around 36 years that ended into a mini-crack and war. The main-frame, TV age ended in the 60s crash, the Vietnam War and the 60s revolution. The age of mobile chips, PCs and cameras ended with the 91 and 2000 crash, the Berlin R=evolution and the Iraqi wars.

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