MARKET VERSUS GOVERNMENT IN THE LIGHT OF THE DISCUSSION ABOUT PATH DEPENDENCE

Joanna Dzionek-Kozłowska

DOI: http://dx.doi.org/10.12775/EiP.2010.006

Abstract


In the 1980s Brian Arthur and Paul David proposed methods which made possible to grasp the phenomenon of path dependency on the ground of economic theory. Their proposal opened still ongoing discussion on that phenomenon as well as on the concepts presented by mentioned scholars. One of the most interesting and frequently commented questions is the problem of the consequences of path dependency for the market. Arthur and David led the attention of economists on the marginalized or even unrealized possibility of dissemination of worse, less effective solutions (technologies) in free market economy. The classical example of such a situation is common use of the  QWERTY keyboard. The existence of such cases was seen as a failure of the market, so that concept made a challenge for the economists and the politicians being supporters of market economy.

An initial aim of the article is to specify when path dependency leads to undermining the efficiency of the market. An analysis and assessment of the arguments used by the participants of the discussion about Arthur’s and David’s idea seems to be the natural point of departure. The possibility of lowering the effectiveness of the market allocation mechanism leads towards consideration of reduction of negative consequences of path dependency by government. In such cases the role of the state seems limited, firstly because of the nature of the phenomenon (difficulties with prediction of far-reaching effects of certain solution), and secondly because of the high costs of the system created for monitoring of technological development.


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