Lock-in institutions and efficiency
Economists who emphasize path dependence generally dispute, at first approximation, the effectiveness of rational choice in understanding institutions. Such economists, belonging to the original (old) institutional economics and the historical school maintain that the constraint function is riddled with inefficient technologies and institutions which agents fail to replace with superior ones even when the switching cost is clearly lower than expected benefit. The argument ultimately rests on a theory of action á la Herbert Simon—where agents become habituated for whatever is the default institution. Such a theory recognizes that agents are ready to replace habits with more viable ones—but only when agents face shocks or crises. Such recognition, though, necessarily allows rational choice, in the sense of responsiveness to incentives, to enter from the rear window: after all, shocks and crises are merely severe incentives.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Liebowitz, S J & Margolis, Stephen E, 1995.
"Path Dependence, Lock-in, and History,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 11(1), pages 205-26, April.
- Khalil, Elias L., 2010. "The Bayesian fallacy: Distinguishing internal motivations and religious beliefs from other beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 268-280, August.
- Paul A. David, 2005.
"At last, a remedy for chronic QWERTY-skepticism!,"
- Khalil, Elias L., 2009. "Self-deceit and self-serving bias: Adam Smith on ‘General Rules’," Journal of Institutional Economics, Cambridge University Press, vol. 5(02), pages 251-258, August.
- Geoffrey Hodgson & Thorbjørn Knudsen, 2004. "The firm as an interactor: firms as vehicles for habits and routines," Journal of Evolutionary Economics, Springer, vol. 14(3), pages 281-307, 07.
- S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
- Vernon L. Smith, 2003.
"Constructivist and Ecological Rationality in Economics,"
American Economic Review,
American Economic Association, vol. 93(3), pages 465-508, June.
- Smith, Vernon L., 2002. "Constructivist and Ecological Rationality in Economics," Nobel Prize in Economics documents 2002-7, Nobel Prize Committee.
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
- Laibson, David I., 2000.
"A Cue-Theory of Consumption,"
4481496, Harvard University Department of Economics.
- Geoffrey M. Hodgson, 1998. "The Approach of Institutional Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 166-192, March.
- Elias L. Khalil, 2010. "Adam Smith'S Concept Of Self-Command As A Solution To Dynamic Inconsistency And The Commitment Problem," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 177-191, 01.
- Felin, Teppo & Foss, Nicolai J., 2011. "The endogenous origins of experience, routines, and organizational capabilities: the poverty of stimulus," Journal of Institutional Economics, Cambridge University Press, vol. 7(02), pages 231-256, June.
- Elias L. Khalil, 2012. "Temptations: A General Theory of Over-eating, Under-saving, Favoritism, Certainty Effect, Spoiling of Children, Pornography-Viewing, and Regretting," Monash Economics Working Papers 26-12, Monash University, Department of Economics.
- Khalil, Elias L, 1997. "Buridan's Ass, Risk, Uncertainty, and Self-Competition: A Theory of Entrepreneurship," Kyklos, Wiley Blackwell, vol. 50(2), pages 147-63.
- Joshua M. Epstein & Robert L. Axtell, 1996. "Growing Artificial Societies: Social Science from the Bottom Up," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550253, June.
- Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-36, December.
- Douglass C. North, 2005.
"Introduction to Understanding the Process of Economic Change
[Understanding the Process of Economic Change]," Introductory Chapters, Princeton University Press.
- Liebowitz, S J & Margolis, Stephen E, 1990. "The Fable of the Keys," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 1-25, April.
- Choi, Young Back, 2008. "Path dependence and the Korean alphabet," Journal of Economic Behavior & Organization, Elsevier, vol. 65(2), pages 185-201, February.
When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:88:y:2013:i:c:p:27-36. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.