Increasing Returns, Path Dependence, Circular and Cumulative Causation in Economics

Increasing Returns, Path dependence, and Circular and Cumulative Causation in Economics


Increasing Returns is another term for Positive Feedback loop.

Path Dependence is also known as Lock-In

Circular and Cumulative Causation is another name for Positive Feedback Loop.


Vicious Circle – Bad gets to worse, Failure leads to more failure

Virtuous Circle – Success breeds Success, Wealth gets more wealth


See this Document – Book Foreward by Geoffrey Hodgson

Geoffrey Hodgson foreward in a book The Foundations of Non Equilibrium Economics.


Key Economists :

  • Allyn Young
  • Gunnar Myrdal
  • Karl William Kapp
  • Kaldor
  • Veblen
  • Paul Romer
  • Knut Wicksell
  • W. Brian Arthur
  • Paul David
  • Steven Durlauf
  • Nicholas Georgescu-Roegen


Various Increasing Returns, Circular and Cumulative Causations Theories

  • CCC Theory of Allyn Young
  • CCC Theory of N Kaldor
  • CCC Theory of Gunnar Myrdal
  • CCC Theory of T Veblen
  • CCC Theory of Paul Romer
  • CCC Theory of Paul Krugman
  • CCC Theory of W. Brain Arthur


Circular Causation in Kaldor Theory




Key Sources of Research:


A A Young

Increasing Returns and Technical Progress

The Economic Journal




Kaldor, N. (1966)

Causes of the Slow Rate of Economic Growth of the United Kingdom,

Cambridge: Cambridge University Press.



Kaldor, N. (1970)

“The case for regional policies,”

Scottish Journal of Political Economy, 17, pp. 337-348.



Kaldor, N. (1985)

Economics Without Equilibrium,

Cardiff, University College Cardiff Press.



Kaldor, N. (1996)

Causes of Growth and Stagnation in the World Economy,

Cambridge, Cambridge University Press




Kaldor, N., 1981.

The role of increasing returns, technical progress and cumulative causation in the theory of international trade and economic growth.

Economie appliquée, 34(4), pp.593-617.



Nicholas Kaldor on Endogenous Money and Increasing Returns

Guglielmo Forges Davanzati




Fujita, Nanako.

“Myrdal’s theory of cumulative causation.”

Evolutionary and Institutional Economics Review 3, no. 2 (2007): 275-284.



Gunnar Myrdal’s Theory of Cumulative Causation Revisited

Nanako Fujita



Circular Cumulative Causation (CCC) à la Myrdal and Kapp — Political Institutionalism for Minimizing Social Costs

Sebastian Berger



European Contributions to Evolutionary Institutional Economics: The Cases of ‘Cumulative Circular Causation’ (CCC) and ‘Open Systems Approach’ (OSA).
Some Methodological and Policy Implications

Sebastian Berger and Wolfram Elsner



Dutt, Amitava Krishna.

“Path dependence, equilibrium and economic growth.”

In Path Dependency and Macroeconomics, pp. 119-161. Palgrave Macmillan UK, 2009.



Setterfield, Mark.

“Notes and comments. Cumulative causation, interrelatedness and the theory of economic growth: a reply to Argyrous and Toner.”

Cambridge Journal of Economics 25, no. 1 (2001): 107-112.



Setterfield, Mark.

“‘History versus equilibrium’and the theory of economic growth.”

Cambridge Journal of Economics 21, no. 3 (1997): 365-378.



Setterfield, M. (2009)

“Path dependency, hysteresis and macrodynamics,”

in P. Arestis and M. Sawyer (eds) Path Dependency and Macroeconomics (International Papers in Political Economy 2009), London, Palgrave Macmillan, 37-79



Setterfield, M.


Rapid Growth and Relative Decline: Modelling Macroeconomic Dynamics with Hysteresis,

London: Macmillan.




Kaldor’s 1970 Regional Growth Model Revisited




Argyrous, George.

“Setterfield on cumulative causation and interrelatedness: a comment.”

Cambridge Journal of Economics 25, no. 1 (2001): 103-106.



Endogenous Growth: A Kaldorian Approach

Mark Setterfield




Increasing Returns and Long Run Growth

Paul Romer



O’Hara, P.A., 2008.

Principle of circular and cumulative causation: Fusing Myrdalian and Kaldorian growth and development dynamics.

Journal of Economic Issues, 42(2), pp.375-387.



Path Dependency and Macroeconomics

edited by P. Arestis, Malcolm Sawyer



Main Currents in Cumulative Causation: The Dynamics of Growth and Development
Phillip Toner
Palgrave Macmillan UK, May 12, 1999 – Business & Economics – 228 pages




Why is Economics not an Evolutionary Science?

Thorstein Veblen

(with an introduction by Jean Boulton)




On the evolution of Thorstein Veblen’s evolutionary economics

Geoffrey M. Hodgson




“Different epistemologies beneath similar methods: The case of causal loop thinkers.”

Maruyama, Magoroh.

Human Systems Management 9, no. 3 (1990): 195-198.



The feedback concept in American social science, with implications for system dynamics.

Richardson, G.

(1983, July).



Path Dependence in Aggregate Output




Nonergodic Economic Growth




Evolution and Path Dependence in Economic Ideas: Past and Present

edited by Pierre Garrouste, Stavros Ioannides,

European Association for Evolutionary Political Economy



Path dependence, its critics and the quest for ‘historical economics

Paul A. David



Positive Feedbacks and Research Productivity in Science: Reopening Another Black Box

Paul A. David



Increasing Returns and Path Dependence in the Economy

By W. Brian Arthur

University of Michigan Press, 1994 – Business & Economics – 201 pages



Positive Feedbacks in the Economy

W. Brian Arthur

26 November 1989



Complexity economics: a different framework for economic thought

W. Brian Arthur

March 12, 2013



A webpage for resources on Path dependence in Economics



The Foundations of Non-Equilibrium Economics: The Principle of Circular and Cumulative Causation

edited by Sebastian Berger



The New Approach to Regional Economics Dynamics: Path Dependence and Spatial Self-Reinforcing Mechanisms

Domenico Marino and Raffaele Trapasso;%20The%20Role%20of%20Internal%20and%20External%20Connections/Chapter%2015%20The%20New%20Approach%20to%20Regional%20Economics%20Dynamics;%20Path%20Dependence%20and%20Spatial%20Self-Reinforcing%20Mechanisms.pdf


Positive Feedback Mechanisms in. Economic Development: A Review of Recent Contributions




Increasing Returns and Economic Geography

Paul Krugman


March 4, 2010


Author: Mayank Chaturvedi

You can contact me using this email mchatur at the rate of AOL.COM. My professional profile is on

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