Hard and Fast Parameters
Some parameters are set hard and fast. Examples are taxes and subsidies.
They may not be impossible to change, but they are difficult. They may also
not have much effect on behaviours.
To give a business example, a firm might groan under the weight of a tax, but
changing the tax could be an arduous process that may not be successful.
There is also the possibility that economic behaviour does not change as much
as is hoped for in the event of the change. For example, the price elasticity of
good classified as necessities is low.
Size of the Buffer
A buffer offers protection from adversity. For example, a lake that is well
stocked with water can sustain a substantial amount of water loss and remain
ecologically relatively unaffected. Similarly, a firm with a huge customer base
may be able to sustain a substantial decline in sales and still show a profit.
Structure of the System
The basic structure of a system is difficult to change, and generally cannot be
changed quickly. In the popular phrase, it is like turning around a battleship.
In our example
of a lake, there may be pollution coming from industrial run
off. The ideal would be to change the production method to avoid the polluted
run off altogether. However, this is a major capital work.
Similarly in a city with a poor transport network, it is a major task to change it
by construcing an underground rail system. On the other hand, marking off
parts of roads dedicated to cyclists by cosntructing low level barriers is a
much cheaper way of making some impression on the problem.
Similarly for a business, as micoecnomic analsyis emphasieses, in the short
term it is stuck with its premises and productive equipment. These can be
changed in the medium or longer term, and then only with substantial capital
outlay.
Lengths of Delays Relative to System Changes
Information needs to be received on time. Information that is not received on
time can cause an overreaction or underreaction, or even oscillations.
Information that is received too early may cause decision makers to put it
aside because it not pressing, while information that is received too late will
receive a hasty or even pannicky response.
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