reason.com/9606/Fe.QWERTY.shtml
The answer is that it is the centerpiece of a theory that argues that market winners will only by the sheerest of coincidences be the best of the available alternatives. By this theory, the first technology that attracts development, the first standard that attracts adopters, or the first product that attracts consumers will tend to have an insurmountable advantage, even over superior rivals that happen to come along later. Because first on the scene is not necessarily the best, a logical conclusion would seem to be that market choices aren't necessarily good ones. So, for example, proponents of this view argue that although the Beta video recording format was better than VHS, Beta lost out because of bad luck and quirks of history that had nothing much to do with the products themselves. This conclusion is hard to quibble with, although it also seems to lack much novelty. But path dependence is transformed into a far more dramatic theory by the additional claim that the past so strongly influences the future that we become "locked in" to choices that are no longer appropriate. This is the juicy version of the theory, and the version that implies that markets cannot be trusted. The success of Intel-based computers, in this view, is a tragic piece of bad luck. To accept this view, of course, we need to ignore the fact that DOS was not the first operating system, that consumers did switch away from DOS when they moved to Windows, that the DOS system was an appropriate choice for many users given the hardware of the time, and that the Mac was far more expensive. Also, a switch to Mac required that we throw out a lot of DOS hardware, where the switch to Windows did not, something that is not an irrelevant social concern. A featured result of these theories is that merely knowing what path would be best would not help you to predict where the market will move. In this view of the world, we will too often get stuck, or locked in, on a wrong path. Most advocates of this random-selection view do not claim that everything has been pure chance, since that would be so easy to disprove. After all, how likely would it be that consecutive random draws would have increased our standard of living for so long with so few interruptions? Instead, we are told that luck plays a larger role in the success of high-technology products than for older products. A clear example of this argument is a 1990 Brian Arthur article in Scientific American. Arthur there distinguishes between a new economics of "knowledge based" technologies, which are supposedly fraught with increasing returns, and the old economics of "resource based" technologies (for example, farming, mining, building), which supposedly were not. Traditional concepts of scale economies applied to production--the more steel you made, the more cheaply you could make each additional ton, because fixed costs can be spread. Much of the path-dependence literature is concerned with economies of consumption, where a good becomes cheaper or more valuable to the consumer as more other people also have it; This sort of "network externality" is even more important when literal networks are involved, as with phones or fax machines, where the value of the good depends in part on how many other people you can connect to. What Arthur and others assert is that path dependence is an affliction associated with technologies that exhibit increasing returns--that once a product has an established network it is almost impossible for a new product to displace it. Thus, as society gets more advanced technologically, luck will play a larger and larger role. The logical chain is that new technologies exhibit increasing returns, and technologies with increasing returns exhibit path dependence.
It would be only reasonable to expect, for example, that panels of experts would do better at choosing products than would random chance. Similarly, to address the kinds of concerns raised in Frank and Cook's Winner-Take-All Society, the inequalities in incomes that arise in these new-technology markets could be removed harmlessly, since inequalities arise only as a matter of luck in the first place. It does not seem an unimaginable stretch to the conclusion that if the government specifies, in advance, the race and sex of market winners, no harm would be done since the winners in the market would have been a randomly chosen outcome anyway. Theories of path dependence and their supporting mythology have begun to exert an influence on policy. Last summer, an amicus brief on the Microsoft consent decree used lock-in arguments, including the QWERTY story, and apparently prompted Judge Stanley Sporkin to refuse to ratify the decree. Carl Shapiro, one of the leading contributors to this literature, recently took a senior position in the antitrust division of the Justice Department. Almost no one uses DOS anymore, and many video recorder purchasers thought VHS was better than Beta (as it was, in terms of recording time, as we have discussed at length elsewhere). The theories of path dependence that percolate through the academic literature show the possibility of this form of market ineptitude within the context of highly stylized theoretical models. But before these theories are translated into public policy, there really had better be some good supporting examples. After all, these theories fly in the face of hundreds of years of rapid technological progress. Recently we have seen PCs replace mainframes, computers replace typewriters, fax machines replace the mails for many purposes, DOS replace CP/M, Windows replace DOS, and on and on. The typewriter keyboard is central to this literature because it appears to be the single best example where luck caused an inferior product to defeat a demonstrably superior product. It is an often repeated story that is generally believed to be true. Interestingly, the typewriter story, though charming, is also false. The Fable The operative patent for the typewriter was awarded in 1868 to Christopher Latham Sholes. Sholes and his associates experimented with various keyboard designs, in part to solve the problem of the jamming of the keys. The result of these efforts is the common QWERTY keyboard (named for the letters in the upper left hand row). It is frequently claimed that the keyboard was actually configured to reduce typing speed, since that would have been one way to avoid the jamming of the typewriter. Remington added further mechanical improvements and began commercial production in late 1873. Other companies arose and produced their own keyboard designs to compete with Remington. A watershed event in the received version of the QWERTY story is a typing contest held in Cincinnati on July 25, 1888. Frank McGurrin, a court stenographer from Salt Lake City who was purportedly the only person using touch typing at the time, won a decisive victory over Louis Taub. Taub used the hunt-and-peck method on a Caligraph, a machine with an alternative arrangement of keys. McGurrin's machine, as luck would have it, just happened to be a QWERTY machine. According to popular history, the event established once and for all that the Remington typewriter, with its QWERTY keyboard, was technically superior. So, according to this popular telling, McGurrin's fluke choice of the Remington keyboard, a keyboard designed to solve a particular mechanical problem, became the very poor standard used daily by millions of typists. Fast forward now to 1936, when August Dvorak, a professor at the University of Washington, patented the Dvorak Simplified Keyboard. Dvorak claimed to have experimental evidence that his keyboard provided advantages of greater speed, reduced fatigue, and easier learning. Navy conducted experiments demonstrating that the cost of converting typists to the Dvorak keyboard would be repaid, through increased typing speed, within 10 days from the end of training. Despite these claims, however, the Dvorak keyboard has never found much acceptance. The dimensions of performance are few, and in these dimensions the Dvorak keyboard appears to be overwhelmingly superior. The failure to choose the Dvorak keyboard c...
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