Positive Feedback, Technology Lock-in, and Implications for Policy

David Kline, Ph.D.
National Renewable Energy Lab (NREL)

Fifth Floor Conference Room

During the last several decades, economic methods have been brought to bear on a wide range of policy problems, with powerful and influential results. However, the resulting paradigm often relies on restrictive assumptions about the nature of technology markets. This seminar begins with the observation that actual markets often deviate in significant ways from these ideal assumptions. In particular, it considers the market phenomena positive feedback and lock-in, which have received increasing attention by some economists in recent years. Brian Arthur, one such economist, described one form of positive feedback as "the more you sell, the more you sell," situations in which increasing market share provides a relative advantage to a particular technology, tending to further increase market share. When this process continues long enough, lock-in can occur: competing technologies are driven out of the market and it becomes very difficult for new technologies to enter.

This seminar will explore the concepts of positive feedback and lock-in through examples that have been considered in recent literature, and suggest that they are common in technology markets. Some recent policy debates will be considered in this light, and some general principles, taken from the area of environmental policy and strategy will be presented.

David Kline is Senior Project Leader with the National Renewable Energy Laboratory in Golden, Colorado. His current work focuses in two areas: (1) Developing and implementing market-based strategies to transfer environmentally beneficial technologies to developing countries; and (2) Facilitating collaboration between former weapons scientists in NIS countries and U.S. renewable energy researchers on civilian technologies as part of the Initiative of Proliferation Prevention. Dr. Kline previously provided analytic support to the U.S. Department of Energy in a variety of areas, and directed Natural Gas Planning and Forecasting for the California Energy Commission. He holds a B.S. in Mathematics and an M.S. and Ph.D. in Engineering-Economic Systems (now part of Management Science and Engineering) from Stanford University.