W. Brian Arthur: Economy

W. Brian Arthur is American economist. Explore interesting quotes on economy.
W. Brian Arthur: 32   quotes 1   like

“Increasing-returns economics has roots that go back 70 years or more, but its application to the economy as a whole is largely new.”

W. Brian Arthur

Source: Increasing Returns and Path Dependence in the Economy, (1994), p. 1: Chapter 1. Positive feedback in economics

“More than anything else technology creates our world. It creates our wealth, our economy, our very way of being.”

W. Brian Arthur

Source: The Nature of Technology: What It Is and How It Evolves. (2009), p. 10

World , Way , Wealth

“Conventional economic theory is built is built on the assumption of diminishing returns. Economic actions engender a negative feedback that leads to a predictable equilibrium for prices and market shares. Such feedback tends to stabilize the economy because any major changes will be offset by the very reactions they generate. The high oil prices of the 1970s encouraged energy conservation and increased oil exploration, precipitating a predictable drop in prices by the early 1980s. According to conventional theory, the equilibrium marks the “best” outcome possible under the circumstances: the most efficient use and allocation of resources.”

W. Brian Arthur

Source: Increasing Returns and Path Dependence in the Economy, (1994), p. 1: Chapter 1. Positive feedback in economics

Change

“The inductive-reasoning system I have described above consists of a multitude of “elements” in the form of belief-models or hypotheses that adapt to the aggregate environment they jointly create. Thus it qualifies as an adaptive complex system. After some initial learning time, the hypotheses or mental models in use are mutually co-adapted. Thus we can think of a consistent set of mental models as a set of hypotheses that work well with each other under some criterion—that have a high degree of mutual adaptedness. Sometimes there is a unique such set, it corresponds to a standard rational expectations equilibrium, and beliefs gravitate into it. More often there is a high, possibly very high, multiplicity of such sets. In this case we might expect inductive reasoning systems in the economy—whether in stock-market speculating, in negotiating, in poker games, in oligopoly pricing, in positioning products in the market—to cycle through or temporarily lock into psychological patterns that may be non-recurrent, path-dependent, and increasingly complicated. The possibilities are rich.”

W. Brian Arthur

Source: Inductive Reasoning and Bounded Rationality (The El Farol Problem) (1994), p. 8

Game , Thinking , Learning , Time

“Our understanding of how markets and businesses operate was passed down to us more than a century ago by a handful of European economists — Alfred Marshall in England and a few of his contemporaries on the continent. It is an understanding based squarely upon the assumption of diminishing returns: products or companies that get ahead in a market eventually run into limitations, so that a predictable equilibrium of prices and market shares is reached. The theory was roughly valid for the bulk-processing, smokestack economy of Marshall’s day. And it still thrives in today’s economics textbooks. But steadily and continuously in this century, Western economies have undergone a transformation from bulk - material manufacturing to design and use of technology — from processing of resources to processing of information, from application of raw energy to application of ideas. As this shift has occurred, the underlying mechanisms that determine economic behavior have shifted from ones of diminishing to ones of increasing returns.”

W. Brian Arthur

Arthur, W. Brian. "Increasing Returns and the New World of Business." Harvard business review 74.4 (1996): p. 100

Behavior , Idea , Understanding , Business

“In many parts of the economy, stabilizing forces appear not to operate. Instead, positive feedback magnifies the effects of small economic shifts; the economic models that describe such effects differ vastly from the conventional ones. Diminishing returns imply a single equilibrium point for the economy, but positive feedback – increasing returns – makes for many possible equilibrium points. There is no guarantee that the particular economic outcome selected from among the many alternatives will be the “best” one.”

W. Brian Arthur

Source: Increasing Returns and Path Dependence in the Economy, (1994), p. 1: Chapter 1. Positive feedback in economics

Appearance , Parting

“This paper has attempted to go beyond the usual static analysis of increasing-returns problems by examining the dynamical process that 'selects' an equilibrium from multiple candidates, by the interaction of economic forces and random 'historical events'. It shows how dynamically, increasing returns can cause the economy gradually to lock itself in to an outcome not necessarily superior to alternatives, not easily altered, and not entirely predictable in advance.”

W. Brian Arthur

p, 128
Competing Technologies, Increasing Returns and Lock-in by Historical Events, (1989)

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