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Irreversibility in Economics


  • Charles Perrings
  • William Brock

    () (School of Life Sciences, Arizona State University, Tempe, Arizona 85287
    Department of Economics, University of Wisconsin-Madison, Madison, Wisconsin 53706)


Three independent literatures have contributed to the understanding of irreversibility in economics. The first focuses on the future opportunities forgone by investments with irreversible consequences. The second considers irreversibility (and hysteresis) in the context of the dynamics of systems characterized by multiple equilibria. The third, with roots in complex systems theory, focuses on entrainment—a phenomenon recognized in economics as lock-in or lock-out. This paper disentangles the different strands in the economic analysis of irreversibility in order to identify the core ideas involved and to connect them to arguments in the parallel literatures on sustainability and uncertainty.

Suggested Citation

  • Charles Perrings & William Brock, 2009. "Irreversibility in Economics," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 219-238, September.
  • Handle: RePEc:anr:reseco:v:1:y:2009:p:219-238

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    Cited by:

    1. Verbruggen, Aviel, 2013. "Revocability and reversibility in societal decision-making," Ecological Economics, Elsevier, vol. 85(C), pages 20-27.
    2. Randall, Alan, 2009. "We Already Have Risk Management - Do We Really Need the Precautionary Principle?," International Review of Environmental and Resource Economics, now publishers, vol. 3(1), pages 39-74, August.
    3. Clemens Löffler & Thomas Pfeiffer & Georg Schneider, 2013. "The irreversibility effect and agency conflicts," Theory and Decision, Springer, vol. 74(2), pages 219-239, February.

    More about this item


    irreversibility; uncertainty; option value; quasi-option value; entrainment;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty


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