viernes, diciembre 15, 2006

Playing With Fire and Collapse

I posted a comment under the article Playing with Fire – The 10 Tcf/year Supply Gap -- Part I, by Andrew Weissman, Editor-in-Chief & Publisher, I think that playing with fire will lead to collapse. This is what I said:

Mr. Weissman,

I read your first article on the emerging gas crisis with great interest. The approach and the information you have presented is very rich indeed.

My interest is compounded as I have been researching and writing for more than 10 years about a current crisis in electricity in the Dominican Republic. I claim to have developed a market architecture and design – electricity without price controls (EWPC) - that solves the electricity restructuring flaws worldwide. Both crisis need to be studied as systemic crisis.

As your “goal is to stimulate further discussion and deeper inquiry into matters of urgent concern,” in line with my suggested generative dialogue on EnergyPulse, I suggest that you have disclosed a case begging the use of Business Dynamics. Business Dynamics is an outgrowth of System Dynamics, which is a "social system design" profession that is about 50 years old, as you can see at the beginning of the System Dynamics NEWSLETTER, Volume 19 – Number 2, June 2006.

The father of system dynamics, and Founding President of the System Dynamic Society, in his plenary address to the International System Dynamics Conference, on July 2003, under the title "Economic Theory for the New Millennium," Jay W. Forrester explained clearly why forecasting is a losing game:

The attempt to forecast future economic behavior is often taken as the proper and maybe the only important test of an economic model. The ability of a model to forecast future conditions is sometimes described as the gold standard for model evaluation. But seldom in the economic literature is there any claim that a model forecast is better than a naïve forecast of simply extrapolating from the recent past. Actually, I believe that attempts to forecast future conditions is a losing game and has been a diversion that has carried economists away from far more productive work.

Among other key elements, Professor Forrester also spoke about how prices develop:

In the model, supply and demand are not balanced by prices alone, as is commonly done in economic models. Inventories, backlogs, and delivery delays are the primary short-term balancing forces. Prices then change as a result of over or under supply of product.

Paraphrasing Mr. Forrester (see Newsletter), we need to "see emerging a stream of powerful, insightful, provocative, and publicly influential books on dynamics of subjects like energy." It could be called "Energy Dynamics."

A sense or urgency to face the worldwide energy crisis and a sense of urgency to practice Energy Dynamics will reinforce each other, creating a virtuous circle. In line with Energy Dynamics, the generative dialogue welcomes your series of articles and especially your goal to help us avoid playing with fire in the future.


José Antonio Vanderhorst-Silverio, PhD
Interdependent (Systemic) Consultant on Electricity
Proponent of Electricity Without Price Controls (EWPC)

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