Path Dependency (#3)

David On Path Dependence

1. Technical interrelatedness (manufacturer who makes the keyboard, typist who is trained on it, etc.) 2. Economies of scale (the gains become larger and larger over time, so it makes it more difficult to switch) 3. Quasi-Irreversibility Of Investment (high degree of switching costs (even if the new one is more efficient); human capital doesn't depreciate very quickly) David gives an argument about the evolution of technological and institutional change

Positive Check

Fewer people dying

Preventative Check

Fewer people having children

Voigtlander

First Divergence (1300-1800) Great Divergence (post-1800) War was a "luxury" good for rulers because by investing in a war, they could eventually collect more tax revenue and have more money Horsemen effect (death rate is positively correlated with income) Tries to show a positive correlation between war and GDP, but without England and the Netherlands, there would hardly be any positive correlation

Arthur On Path Dependency

Increasing returns to scale determines the path dependency

QWERTY Keyboard

Less efficient than the Dvorak keyboard, but it still became the dominant one Touch-typing (rather than pecking) led to the QWERTY keyboard becoming dominant As typists became part of offices, the network effect began to take place (people continuing to use QWERTY keyboards because that was what they had been trained in)

Real Wage V.S. Real Income

Real wage is better because income per person includes very wealthy people, and working class wages respond more to population changes

Liebowitz & Margolis

Reason you don't switch is because the costs of doing so are too large If the Dvorak keyboard was real that much better, somebody would have taken the initiative to start the switch (Coast Theorem)

Malthus

Said there were limits to how much government policies can perfect the human condition In the long-run, resources and population should be in equilibrium Malthus speaks to the marriage rate and birth rate (in poor economic conditions, fewer people will get married) Does not talk about birth control

Path Dependence

Small decisions/events having an impact on the eventual outcome Some events can "lock in" a process and influence its future

English Civil War

Spike in the real wage rate during the 17th Century was because of the English Civil War More people died, so it caused a spike in the wage rate More tobacco began to come to England from the New World, so there was a switch from spending money on raising children to spending money on consumption goods

Kelly & O'Grady On Malthusian Economics

Studied merchants, which were payments that needed to be made to get permission to get married Also looked at wheat prices (since people spend most of their money on food, this was a good measure of how many people may be getting married) Says transfers of land may demonstrate people needing to sell land to get money Below 24d (pence), there is a negative relationship between marriages and wheat price Above 24d (pence), there is a positive relationship between marriages and wheat price When things get bad for people, there is a redistribution of wealth towards wealthy people

Clark On Subsistence Income

This is not the "bare minimum" level of income This income level allows you to live well but not move up the social ladder