Path dependency in contemporary economics

The article gives an account of a recent attempt to rebuild economics along the lines of increasing returns. The current orthodoxy is criticised for overemphasizing the role of decreasing returns. For the sake of analytical rigor economists sacrifice a correct picture of the modern world, say the critics. Small events are magnified by the positive feedback. The system is thus set on a path and cannot shake off its history. Path dependent processes are illustrated by the persistence of the QWERTY keyboard. As the world is stuck with this inferior standard, government action is needed to adopt a better alternative. However, the second part of the article offers a successful refutation of the QWERTY story. This particular example of path dependency evolved into an ambitious interdisciplinary project whose aim is to introduce new, visionary approaches into the scientific thinking. The prospects of chaos theory in economics are therefore briefly outlined.

Keywords: increasing returns, chaos theory, QWERTY, non-linearity, positive feedback, path dependency