Experience Curves » business

Q:What Law of Nature Determines Price and Volume etc.

Don — Mon, 09 Nov 2009 17:44:13 +0000

A: For an Economy, like say the U.S. where we have variables Employed Men, Price,Volume,Wages,Investment,Scale of Operation, Production Process Mean Dimensions of Radius R with Number of space dimensions being used = m, Dollars, A Gross National Product, Specific Products and the change in time of these variables then:

For a change in Production of a Product with time the Behavior of Men is to Minimize their time/Per unit of Volume of the product, i.e. that ratio (dMen/dRadius with time)=0.

Using reduced values, or indexed values of these variables based on a given year for GNP, Price, Volume, etc. and the Fact that Dollars=Price*Volume=Wages*Men, and Volume=Radius^m gives a Slope for the Experienc Curve=(1/m-1)*(1-Exp(-k*t)) wherE k=growth rate constant for the product and t=time (usually years) .

Because “All Men involved minimize their time per unit of space dimension, with time”. Thus this Law of Nature is claimed as Garnett’s Minimization Law

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Inherent in the foregoing is also the fact that Investment=Scale^(1/m).

Garnett’s Minimization Law of Human Behavior

Don — Tue, 25 Aug 2009 04:16:19 +0000

In the world of Supply and Demand the money that one group of people are willing to spend for something is equal to the amount of Money another group of people are willing to provide (sell) that something. The something can be anything, either goods (a product) or services. Money is identical to the time of Employed men times their Wage rate as that is exactly what one can buy with money. The production of that something in a physical facility has dimensons, like the Radius of a spherical tank brewing beer, and the quantity of beer or its Volume is proportional to the Radius raised to the power of the number of dimensions. In this case V=R^(N)=R^(3), since the number of dimensions is 3. In general, the economy is evolving, that is, it is a function of Time. The rate of change with time for the variable, say Employed is dE/dT, and Radius is dR/dT. The behavior of people when it comes time to change supply and demand is defined as Garnett’s Minimization Law:

“People minimize their time per unit of dimension, namely d((dE/dt) / (dR/dT))/dT = zero = 0 .

The result is that the Log(Money)=(1/N)*Log(Volume). Also,

Log(Price)=(1/N-1)*Log(Volume)

and other relationships that can be worked out from Money=Price*Volume=Wages*Employed=Wealth+Costs,

and the fact that demand is frequently exponential with time.

WCCE8 Presentation: Research as Investment

Don — Sun, 26 Jul 2009 06:05:09 +0000

Presentation made on August 24, 2009, in Montreal, Canada.

dig-presentation-v3

Power Point presentation “with recorded voice”. Research as Investment

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Scale up of Investment with Pressure

Don — Fri, 17 Jul 2009 01:17:20 +0000

Once you accept that the investment for a tank or reactor or container scales up with the 1/3rd power of volume then the scale up with pressure naturally follows.

If the rate of reaction of a chemical reaction is proportional to pressure (P) then raising pressure will lower the volume required at the same time that it will raise the thickness of the walls to contain that higher pressure. It follows that Investment will be:

Investment=k*(1/P)^(1/3)*P

Investment =k*P^(2/3)

If the reaction is proportional to the pressure squared (2 species->one species)

Investment=k*(P)^(1-2/3)=k*(P)^(1/3)

For a 3rd order pressure dependency on the reaction rate the Investment is independent of pressure, i.e.

Investment=k*P^(1-3/3)=k

For orders higher than 3 other things like heat transfer to/from the reactants (i.e. area or order 2), or limiting conversion to limit temperature rise, or use of diluents to control temperature rise, may become dominant, limiting the pressure effect between P^0 to P^(1/3).

By my memory the investment for polyethylene plants scale as the 1/4th power of Pressure.

The foregoing is applicable for a fixed production rate. However if one is in the position of building a plant where the justification of the capital is a key element then one likes to consider investment per annual pound. Larger plants tend to give lower investments/annual lb. Since production rate is proportional to P raised to the power of 1,2, or 3 preceding the investment per annual lb will be proportional to Pressure raised to the power of -1/3, -5/6, -6/3=-2. That being the case plants tend to be at the highest pressure and largest scale.

Scale-up Investment vs. Scale

Don — Thu, 16 Jul 2009 07:03:10 +0000

Why do scale up rules of thumb work and why is the historic six tenths power six tenths?

The cause and effect relationship is shown in this link (publication)

scale

The Full Experience Curve

Don — Sat, 25 Apr 2009 19:54:05 +0000

Experience curves show the scale factor or number of dimensions “m” of the production facility, the growth rate constant constant, and contain cycles with time. The full equation for the experience curves depends upon the scale of the production facility at a given time, the number of men currently working on it and the expansion effort currently underway. Using men(t) as a variable, which is proportional to money via wages, and an exponential demand from the population gives the following differential equation and its’ solution. The periodicity is shown to be a fundamental part of the solution.

the-full-experience-curve

Research as Investment

Don — Mon, 13 Apr 2009 06:38:07 +0000

I was talking to Gregory S. Patince recently about Research being an Investment, or not. My view of course is that it can be if managed to be an investment. Just how that is so is included in the following documents. The criteria of what is required is defined.

research-as-investment-power-point1

research-as-investment-manuscript

These documents are part of the continuing dialog about what Experience Curves are and how they can be extended beyond historic data.

Inflation and Real Growth

Don — Sat, 17 Jan 2009 00:02:40 +0000

The post titled “Money” shows the GNP or money=k*(employed)^4 and volume=k*(employed)^2.16 and

price=k*(employed)^1.84. In the context of these posts the number of dimensions of the production

facilities, m=2.16 and the price exponent is (4-m). Differenting by parts results is the fraction of the change

in GNP that is real growth is m/4 and the part that is inflation is (4-m)/4. The value of m therefore determines

the fraction that is inflation and real growth. The value of m determine the fraction that is real growth, namely;

m=1 results in 25% real growth,

m=2 results in 50% real growth

m=3 results in 75% real growth.

Obama’s and others “put people to work” with bail-out government money will not help the economy much if

the number of dimensions of those activities is low (e.g. a shovel in hand ditch digger) vs. high

(like building a petrochemical plant).

Money

Don — Mon, 29 Dec 2008 15:03:18 +0000

Article for Chemtech on the dimensions of economic systems and their business applications (money=k*People^4):

Part One: money22
Part Two: money23

Note Figure 5, a GNP as deflater forecast from 1984 forward that is amazingly accurate.

The Geometry of Experience Curves

Don — Sat, 27 Dec 2008 14:10:04 +0000

the-geometry-of-experience-curves-aiche5-cut

Defines what an experience curve really is and why.