The Patterson Equilibrium

The Patterson Equilibrium, formulated by David M Patterson, states that as efficiency is increased in a given system, disruptions to the system will be more pronounced and prolonged to the point that recovering from the disruptiions to the system will be more costly than maintaining a less efficient system (by paying for more margin) in the first place. The point at which maintaining excess reserves in a given system equals the cost of a prolonged system disruption to all end users is the definition of the Patterson Equilibrium.

Efficiency is increased, according to the theory, by maintaining less margin (for error) in a system. However, when there is less margin for error in a given system, and a disruption occurs, it is more pronounced and prolonged than when a disruption occurs in a system operating with more margin. At a certain point, the total costs of the periodic system disruptions to all end users of the system will outweigh the costs of maintaining excess reserves in the system.

Some areas applicable to the Patterson Equilibrium are highway traffic modelling, air-traffic modelling, business modelling, and electrical grid operation.

Links:

• efficiency (economics)
• allocative efficiency

Category: JEL-B