Essays on Increasing Returns and Path Dependence in the Economy Assignment

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The paper 'Increasing Returns and Path Dependence in the Economy' is a great example of a Macro and Microeconomics Assignment. The current economic circumstances depend on the vital ways of history. All the current that are inherited and the future that is built come as a result of economic history. Institutional entrepreneurship refers to activities spearheaded by particular actors who have developed an interest in certain institutional arrangements and who leverage resources to transform existing institutions or to come up with new ones(Arthur, 1994). Olson (2001) argues that “ new institutions arise when actors possessing resources realize an opportunity in the interest they value most” (p.

34). As such it introduces interests, agency, and power into the analyses of institutional organization. In Australia, path dependency has played a significant role in the history of institutional change and continuity. The outstanding feature was the historic compromise between the leaders and classes of labor and capital, arbitrated through the institutions created to implement it. By the 1980s and ’ 90s, the Australian government had deep roots and transformed much of the institutional structure; most of which survived from the old rule to the new. Notably in Australia, the neo-liberal era of post-1983 Australia preserved vital features from the protectionism-laborist era that was its predecessor, which as a result preserved the vital features of the political economy.

However, the regime change and survival have little influence on rational choices in the present or past and that institutional change is a process with no progress or adaptation oriented purpose. The old Australian survived unchanged since before the Great War. Of predominance was a historic compromise between leaders and classes arbitrated through state institutions like the protectionist system, agricultural marketing, and state-owned banks.

During this time, there was a high degree of social and political consensus that was a direct result of a new consensus. This was the force that aided in galvanizing ideologies, but economic forces, cultural attachments, and geopolitics that had been shifting for long. Changes in ideologies in Australia were seen as powerful and dominant in institutional change. Just like all other parts of the world, changes in economic theories and government in Australia strongly affected public policy (Olson, 2001).

The government elites were influenced by intellectualism and commitment to ideologies. Powers of liberalism of the 1830s, democratic socialism of the 1890s, monetarism, and neoliberalism of the 1970s are all living testaments of ideological shifts that survived due to sufficient reception to path dependency. Path dependency also impacted on public collections or aggregations of individual choices, solely expressed through markets. Market distortion through rent impacts on sclerotic growth patterns. Agents make choices to create arrangements that will promote or hinder efficiency. As a path-dependent process, behavior, rationality, and choice lead to neglect of social structures constraints and imperatives. QWERTY keyboards This posits an exemplary scenario where the path dependency process leads to inefficiency.

Liebowitz et al (1995) cite the example of the QWERTY typewriter keyboards of 1989. He asserts that the QWERTY keyboard was a perfect example of market failure. Initially, the keyboard was used in 1868 by Christopher Latham. Later Sholes improved on the already existing keyboard by introducing an arrangement that was meant to slow down the touch typists. In 1936 August Dvorak, introduced his Dvorak Simplified Keyboard (DSK) whose design was according to ergonomic principles.

Later ergonomic studies showed that the advantages for DSK over QWERTY were non-existent or very minimal. Further QWERTY as a standard keyboard produced more touch typists compared to the rival keyboards. It is unlikely that it would have survived if it were inferior as had been alleged by the earlier studies.


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