In economics speak, the law of diminishing marginal returns sets in at some point. We don’t know what point it sets in but most of economic analysis seem to look at situations where the law of diminishing marginal return has already set in. That is really the only way we can ensure that the system has some sort of equilibrium. And within a limited timeframe of analysis, that is probably true – there is always some kind of limit that is causing the cost curve to be upward sloping.
So Moore’s law is a little bit of a challenge to that notion; but in reality, it does not contradict typical economic analysis because economist is always taking a snapshot in time. And when it doesn’t work, we take the ‘long run’ which is meant to say ‘eternity’ basically. This time horizon between the short run and the long run, which is when just about everything happens, is where we don’t have the clear view.
And because we don’t have a clear view, there are possibilities, lots of them. Moore’s law has been around for 60 years and been predicted to end for a long time now. The reason we think it is going to end is the idea that the diminishing returns will set in somehow. I think there’s no doubt it’ll end at some point. Preparing for that possibility is important; but maybe not as important as the opportunity that present itself from the time it is true.
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