ps4 is going to cost way less because if they stick to the cell which is familar with dev now and will be cheaper then the ps3 at launch  and they could at least get 3 or 4 x the processing power

It doesn't work that way, though. Much of the increase in dev costs springs from the "need" to hire more folks to do art assets, since you "need" to use up all that extra horsepower to keep up with the Jonses, right? Having too much power under the hood can, in some ways, be detrimental to the bottom line, because it increases the amount of work you need to do to complete a game.

I'm wondering if we're near the upper limit of what's financially feasible for videogames, in terms of horsepower. The PC eclipsed the HD consoles in terms of technical ability years ago, as it always has, and yet this is the first generation where I can't think of any game that really pushes the PC's envelope far above and beyond what can be done on a home console. The tech is there, but I have to imagine that economics are the new bottleneck. If that's the case, is there much point in chucking too much power into your console?

People, instead of debating this ad nauseam, I think we can take what Kynes said here to be the most realistic scenario.

Given that the Wii is a generation behind the PS3/360, and given Nintendo's traditional track record on home consoles (SNES, 64, Cube), they would now be developing a console on par with the PS4/720. In the track record, the Wii is the only exception, and it was for philosophical reasons, but now their strategy is shifting back to making rocking hardware performance-wise, so I think it would be fair to say we're looking for a Wii3 level of performance here, since Wii was essentially Gamecube 1.2 (i.e. you need to skip a gen for this Nintendo round, or think of it as if Wii2 never existed). In other words, next gen will, performance-wise, be very similar to last gen, but this time:

PS2 is played by the Nintendo Dream

GC/XBOX are played by PS4/720

And who won last time? A-there you go.

And yet , people complain about that for the last 5 years, and dev looked at the Wii which is the easiest and cheapest to develop for and ignored it. All Sony has to dos is stick to blu-ray, it wa sthe reason the lost so much money, but prices have going down drasticly and GPU has exploded in a matter of years. The consoles are way behind the PC because its up to date even with a cheap GPU. All Sony needs to do is upgrade its memory and GPU and see a huge gap grows between it and the Wii2.

Right. But that's not what I asked. The question wasn't "can Sony do that?" It's "won't Sony just price devs out of its system if it does that?" It's true what you said about 3rd parties and the Wii. It's also true that profits are generally poor this generation. And it's true that, as I said to epicberserk, this is the first generation where PC games by and large have limited themselves to what's doable on the HD consoles, in spite of the consles being "way behind," as you put it.

I'm not saying you're not right, and that Sony will not chuck moar power into the PS4. I'm just wondering aloud what the results of that will be. Unless something comes up that drastically reduces dev prices, my money's on "disaster."

Not only will they but developers are already asking for it. How many developers have complained they wish either the PS3 or 360  were more powerful because they acheive what they really wanted to. 

not really if they stick to the cell and microsoft idk what their going to do tho