Some thoughts on week 1 readings:(posted 8755 days ago)What disturbs me about this "network externality" and "path dependence" debate is that it does not sufficiently seem to take into account the demand side of the problem. For how do we really know what the "better product" actually is, and how would we obtain the appropriate criterion as to whether market mechanisms have yielded the most efficient result? Maybe the "QWERTY"-story is a kind of special case in this context because there should be quite clear-cut criteria as to the technical superiority of a keyboard setup (though even that appearently is not as obvious as it might be at first glance). However, just look at the other example brought up by Liebovitz & Margolis, VHS vs. Beta; this battle basically seems to have been decided by consumers' preferences and demand resulting from these, as it should be according to standard economic theory as we know it since Menger's, Jevons', ... "marginalist revolution". Thus, the real problem turns out to lie in the emergence and evolvement of consumer preferences, which standard theory traditionally has very little to tell about. So, from my point of view, no objections at all against the notion of path dependence and its importance for explaining economic phenomena of all kinds; however my emphasis would be slightly different one. This stress on the demand side with all its psychological, sociological, anthropological etc. intractabilities seems to me one more proof that modern economics would greatly benefit from a heavy dose of interdisciplinary research ...
As concerns Keynes, I agree with the reading notes that his argument is wrong, even quite plainly so. Keynes actually recognizes the crucial point when he draws the distinction between absolute and relative needs (p. 365), but by almost completely neglecting the latter in carrying on, he gets to miss the point. The key to the "economic problem" to persist despite all spectacular growth in material wealth is the principal insatiabiliy of relative needs, and that's about it. As a refinement of this, I found Easterlin's article (week 2) highly interesting ...