Tuesday, December 09, 2008
Positive Feedbacks
Not necessarily what I will get from my students after prescribing them actual (shock! horror!) reading for ECO2003P, but hey. Anyway, the reason I mention this is that while lecturing in Intermediate Micro one of the subjects that I cover with the students is that of monopoly power through network externalities, increasing returns, lock-in and specific, or irreversible, investment. The discussion is based on two articles both very easy to read:
W. Brian Arthur, 'Positive Feedbacks in the Economy', Scientific American, Feb 1990.
Paul A. David, Clio and the Economics of QWERTY, AER, May 1985.
I am hoping to get some lights on in the minds of some of the kids by doing a question-based discussion of the papers. I want them to engage with the readings and come up with their own ideas, I know such intentions may be naive but I remain optimistic. Even if only 1-5 of the 65 students gains some insight and some ability to think better about the world as a consequence of the discussion (rather than a straight up lecture) then I will be happy. In fact, I am guaranteed at least one with a bright and engaging student who I see is getting a fair amount from my lecturing, but I am hoping to get more than four more students to have something more than crepuscular lights going on in their heads.
Does anyone have specific ideas for South African situations of lock-in, network effects resulting in monopoly and irreversibility of investment resulting in monopoly type market dominance?
As I recall, the QWERTY phenomenon is pretty controversial... You know any more about that?
What do you want to know? Have you read the paper? The main idea is that there are several factors that play into (generalized) increasing returns - economies of scale, technical interrelatedness and quasi-irreversibility of investment. The QWERTY example fits these characteristics, as well as historical happenstance in terms of history. What else did you want to know?