Attractor State of Productive Capacity is Shifting

What is an attractor state?

It is a state around which a dynamic system organizes itself.

Self-organization is the spontaneous often seemingly purposeful formation of spatial, temporal, spatiotemporal structures or functions in systems composed of few or many components. In physics, chemistry and biology self-organization occurs in open systems driven away from thermal equilibrium. The process of self-organization can be found in many other fields also, such as economy, sociology, medicine, technology.

“Stable internal representations of the external world indicate the presence of attractors. Here, an attractor means one of the states of the system where the system settles after starting from a given initial condition. Self-organization needs these attractors to have a sufficient instability to be able to alter in order to adapt to the environment.”  (Self-organization at scholarpedia.org)

The plot below will show how the economy settles into an attractor state for Productive Capacity. Then it breaks away from the attractor state to adapt to a new environment of economic growth for the next business cycle. The economy shows both stability and instability in the graph. That is the key to an attractor state of self-organization, adaptation and growth.

Here is the graph which plots Real GDP against the TFUR… (capacity utilization * (1 – unemployment rate). (TFUR is what I call Total Factor Utilization Rate.)

update attractor productive cap

Productive capacity is found where the attractor lines cross a TFUR of 100%.

The pattern is normally for the plot to follow a line originating at the crossing of the x and y axes during the growth phase of a business cycle. This line represents an attractor state for the growth in a business cycle. Then the plot rises above the line and falls to the left into recession setting up the next business cycle at a higher attractor level of Productive Capacity and Real GDP.

The 1990s were an exception because the plot kept rising without the TFUR falling into a recession.

This updated graph shows that the economy has lifted off from the current attractor state and is heading toward the future projected attractor state.

How will we get there?

There are two possibilities…

  1. A recession
  2. The TFUR stays stable while Real GDP keeps rising. But the key is to have increasing productivity. This happened in the 1990s.

We do not see increasing productivity growth, so the most likely path will be through a recession.

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