Table 1 The Evolution of Production and Its Organization

1. Table 1 The Evolution of Production and Its Organization Production Method Economy Ownership/Control Purpose Scope Production for use Handicraft–hand tools Money Proprietor/Partner Local/Regional P/P Manager > joint stock company Production for sale Regional/National Factory – Machines Money > Credit Industrial – Machine Process National/ International Stockholder–Absentee Owner/ Managerial Credit (Mark I) Capital gains Technological – Electronic Machine Process Credit– Derivatives (Mark II) Stockholder–Absentee Owner/ Managerial Elite Asset Value Manipulation Anational

2. Path Analysis Veblen British Rail System in 1914 The mud hole metaphor – more on this later David Clio and the Economics of QWERTY – 1985 Keyboard configuration Technological Lock-in Why – the nature of a path Ergodic Non-ergodic Small events early in a technology

3. Path – continued Arthur Non-linear probability – 1991 Example of rings in an urn Draw a sample and replace with color bias What happens – no stable equilibrium No necessity to pick better technology VHS – Beta Increasing returns problem Possible solution – Positive feedback Standard approach is – negative feedback system Firm and industry location Carpet firms in Georgia – why there? Third Italy – history of institutions and institutional adjustment Complexity theory

4. Path Dependence – A Story and a Metaphor • The Reivers

5. From Faulkner’s The Reivers There was something dreamlike about it. Not night-marish: just dreamlike--the peaceful, quiet remote, sylvan, almost primeval setting of ooze and slime and jungle growth . . . [In it] the expensive useless mechanical toy rated in power and strength by the dozens of horses, yet held helpless and impotent in the almost infantile clutch of a few inches of the temporary confederation of two mild and pacific elements—earth and water— . . .; the three of us, . . . now unrecognizable mud-colored creatures engaged in a life-and-death struggle with it, . . . And all the while, the man sat in his tilted chair on the gallery watching us while Ned and I stained for every inch . . . and Boon . . . strove like a demon, titanic, . . . lifting and heaving it forward; . . . he dropped, flung away his pole. . . “How much do you have to pay him to get dug out?” Ned asked. “Two dollars,” Boon said.” “Two dollars?” Ned said. “ This sho beats cotton. He can farm right here setting in the shade without even moving. What I wants Boss to get me is a well-traveled mudhole.” “Morning, boys,” he said. “Looks like you’re about ready for me now.: “Looks like it, “ Boon said. . . . “We might a got through . . . if you folks didn’t raise such heavy mud up here.” “Don’t hold that against us,” the man said. “Mud’s one of our best crops up thisaway.” “At two dollars a mudhole, it ought to be your best,” Ned said. “That was last year,” the man said. “It’s double now.” “It’s six dollars,” he said. “I charge a dollar a passenger. There was two of you last year. That was two dollars. The price is doubled now. There’s three of you. That’s six dollars Boon said, “Suppose I don’t pay you six dollars. Suppose I don’t pay you nothing.” “You can do that too,” the man said. “ . . . . Maybe you’d rather walk back to Jefferson than pay two dollars.” (Faulkner, pp. 80-91)

6. Roads, Cars & Mud holes • Evolution of Roads, Cars • And the Economy becomes dependent on single source variable route individual transportation system • GM plan • Economies are both path dependent and path created • Depends on structure, function and flexibility • Flexibility is inversely related to strength of tradition • Myth, legend and invidious differential advantage • Strength of status quo • Flexibility is directly related to strength of learning and growth of community shared knowledge • Technology • Education • Objective and Experiential knowledge (the interaction of knowing & doing)

7. Examples of Feedback Attributes