Theory of International Politics

This paper explores the dynamics of allocation under increasing returns in a context where increasing returns arise naturally: agents choosing between technologies competing for adoption. Modern, complex technologies often display increasing returns to adoption in that the more they are adopted, the more experience is gained with them, and the more they are improved.1 When two or more increasing-return technologies 'compete' then, for a 'market' of potential adopters, insignificant events may by chance give one of them an initial advantage in adoptions. This technology may then improve more than the others, so it may appeal to a wider proportion of potential adopters. It may therefore become further adopted and further improved. Thus a technology that by chance gains an early lead in adoption may eventually 'corner the market' of potential adopters, with the other technologies becoming locked out. Of course, under different 'insignificant events' - unexpected successes in the performance of prototypes, whims of early developers, political circumstances - a different technology might achieve sufficient adoption and improvement to come to dominate. Competitions between technologies may have, multiple potential outcomes. It is well known that allocation problems with increasing returns tend to exhibit multiple equilibria, and so it is not surprising that multiple outcomes should appear here. Static analysis can typically locate these multiple equilibria, but usually it cannot tell us which one will be 'selected'. A dynamic approach might be able to say more. By allowing the possibility of 'random events' occurring during adoption, it might examine how these influence ' selection' of the outcome - how some sets of random 'historical events' might cumulate to drive the process towards one market-share outcome, others to drive it towards another. It might also reveal how the two familiar increasingreturns properties of non-predictability and potential inefficiency come about: how increasing returns act to magnify chance events as adoptions take place, so that

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Competing technologies, increasing returns, and lock-in by historical events*

The article studies the evolution of the constitutional arrangements in seventeenth-century England following the Glorious Revolution of 1688. It focuses on the relationship between institutions and the behavior of the government and interprets the institutional changes on the basis of the goals of the winners—secure property rights, protection of their wealth, and the elimination of confiscatory government. We argue that the new institutions allowed the government to commit credibly to upholding property rights. Their success was remarkable, as the evidence from capital markets shows.

Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England

Increasing Returns and Path Dependence in the Economy

This paper models economic development as a process of institutional transformation by focusing on the interplay between agents' occupational decisions and the distribution of wealth. Because of capital market imperfections, poor agents choose working for a wage over self-employment, and wealthy agents become entrepreneurs who monitor workers. Only with sufficient inequality, however, will there be employment contracts; otherwise, there is either subsistence or self-employment. Thus, in static equilibrium, the occupational structure depends on distribution. Since the latter is itself endogenous, we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long-run effects. In one case the economy develops either widespread cottage industry (self-employment) or factory production (employment contracts), depending on the initial distribution; in the other example, it develops into prosperity or stagnation.

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Occupational Choice and the Process of Development

Abstract of British Historical Statistics

Technical choice innovation and economic growth

British economic growth, 1688-1959

S. Kuznets. Modern Economic Growth. Rate, Structure, and Spread

This book identifies the strategic changes in economic organisation, industrial structure and technological progress associated with the industrial revolution, which took place in Britain over the century 1750–1850 and which marked a watershed in world economic development - the beginnings of modern economic growth for developed countries and an example of spontaneous industrialisation for third world countries. The book assesses both starting point and achievement, analyses the substance of economic transformation and evaluates the role of government policy and institutional change in retarding or accelerating economic development. The second edition updates and expands the first by taking into account (and giving bibliographical references for) major topical knowledge and ideas. This work has proved a successful textbook for sixth form students as well as undergraduate students in faculties of economics, history, geography or social science generally. It is, however, sufficiently nontechnical to be intelligible to a general reader interested in putting problems of economic development into historical perspective.

Phyllis Deane

Papers

Abstract of British Historical Statistics

Technical choice innovation and economic growth

British economic growth, 1688-1959

S. Kuznets. Modern Economic Growth. Rate, Structure, and Spread

The first industrial revolution