Explain your answers and why in details. The theory of path dependence suggests

Question

Explain your answers and why in details.

The theory of path dependence suggests that market economies seldom lock-in on a particular technology. shows that the dominance of private automobile transport in Los Angeles was inevitable. says that technologies which arc developed early gain advantages due to infrastructure investment, economies of scale, and the growth of complementary industries. provides a rationale for a laissez-faire approach to new technology. implies that the majority of R&D; in new technology should be government run. Clean technologies have long-run private costs comparable to existing technologies. are superior to existing technology in terms of product quality. c. generate no environmental externalities. are often several decades from commercial development. a and c.

Explanation / Answer

1. The theory of pathe dependence of technological development was first discussed by David in "Technical choice, Innovation, and Economic Growth." He discused it also in "Understanding thr Economics of QWERTY: the Necessity of History." In short, the theory says that future development of technology depends on the historical path of technological development. And once the history has moved on a path, it is rather difficult to join another path of technological development. Therefore, the correct answer is (c).

2. Clear technologies are those technologies that have minimal externalities. In short run, these tecnologies are often highly costly in comparison to existing technologies. But if investment in these technologies is undertaken through large scale corrdination, the long term costs of these technologies are often comparable to those of existing technologies. The correct answer is (e).

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