From: jimruttshow8596

Economist and complexity thinker Brian Arthur is particularly recognized for his groundbreaking work on positive feedbacks and increasing returns within the economy [00:00:35]. This field examines the phenomenon where products that achieve market share find it progressively easier to gain even more market share [00:00:40].

Core Concepts

Increasing Returns

Increasing returns describe a situation where initial success leads to greater ease in acquiring further success [00:00:40]. Arthur was among the first to identify and explain this phenomenon from an economics perspective [00:01:02].

Network Effects

A key aspect of positive feedbacks and increasing returns is the role of network effects [00:00:51]. These effects can lead to markets becoming “locked” into dominance by a single player [00:00:53].

Examples of technologies that have exhibited this “locking” effect include Microsoft Windows and Facebook [00:00:55].

Contrast with Equilibrium Economics

Arthur’s work on positive feedbacks and increasing returns stands in contrast to traditional equilibrium economics [00:21:10]. Equilibrium economics, particularly from the 1870s onwards with the adoption of algebra and calculus, tended to assume a fixed number of goods and a static economic structure [00:23:00], viewing economic change as a series of shifts between equilibria [00:28:53].

In contrast, thinkers like Joseph Schumpeter, and later Arthur, emphasized that the economy is constantly in motion, with new structures and technologies emerging, and is therefore far from a state of equilibrium [00:25:51].

Implications for Technology Evolution

The principle of positive feedbacks also applies to the evolution of technology itself [00:35:50]. Technologies are built from existing components, and when a novel technology is created, it can, in turn, become a new building block for further technologies [00:34:47]. This creates a self-reinforcing process where the overall collection of technologies “builds itself from itself” [00:35:58].

This concept extends to the relationship between science and technology, forming a positive feedback cycle [01:02:38]. Technologies provide science with new instruments and methods, while science offers technology an understanding of new phenomena [01:02:40]. They are mutually reinforcing and supporting [01:02:59].