Positive feedback. There are many positive feedback effects in economics,

i.e. effects when some prices or other variables fall to zero or rise to

a very high levels.


This can be solved with a 'pegging', which is a minimum price, maximum price, rule or

other constraint.



e.g. retail

	a. payment must flow from the retailer to the supplier, never the other way around.

	b. sale price cannot be more than 1000 times the wholesale price paid to the supplier



prices for a drink like Coca-COla, for example, could fall 

	from $3 to 1/1000000 x 1000 = 1/1000 of a dollar for a large drink under this rule.



example

	1. low economic activity

	2. wages fall due to multiple offers of labour

	3. less economic activity

	4. repeat cycle 1 to 3, labour rates fall to zero.



solution

	increase minimum wage from $7 per hour to $7000 per hour


	1. some employers still able to pay

	2. large amounts get distributed back into the community

	3. more employers able to pay

	4. a new stable system is established, based on the pegging of minimum wage rate = $7,000 per hour.



peggings are necessary to avoid mass starvation in free-market economic systems (check).

