Reading: Hoyt Bleakley and Jeffrey Lin (2012): Portage and Path Dependence
Hoyt Bleakley and Jeffrey Lin (2012): Portage and Path Dependence Quarterly Journal of Economics 127 (May): 587–644 <http://qje.oxfordjournals.org/content/127/2/587.full>
If commodities are fully rival and excludible—i.e., the resources devoted to the production of one unit are thereby used up, and cannot be used to aid in the production of a second unit; and if sellers can easily prevent non-buyers from benefiting from what they produce (and non-buyers can easily prevent sellers from imposing costs on them—then, if the distribution of wealth accords with desert and utility, the competitive market economy in equilibrium does the job.
But how often is production really constant returns to scale? And how often are spillovers truly absent? And where and when are markets thick enough to actually be in any form of “competitive equilibrium”?
There are four plausible things going on here:
- Path Dependence
- Thick Markets
- Division of Labor
But they overlap. How separate are they? Is it worth distinguishing them?
Five Orienting Questions for Bleakley and Lin:
- In what sense is the Fall Line “exogenous” here?
- About how many river-watersheds intersect the fall line here?
- How much of the location of American population do their regression results claim is dictated by the location of the Fall Line?
- “Path dependence versus sunk costs”—what is the distinction here, exactly?
- “Path dependence versus sunk costs interacting with decreasing or increasing returns to scale”—how are we to parse this sentence, exactly?
Bleakley and Lin:
- Many cities in North America formed at obstacles to water navigation…
- Portage sites…
- The fall line...
- "Path dependence"
- Not sunk costs interacting with non-constant returns to scale.
- No sign that portage sites are currently in decline
- The coefficient on portage asymptotes to zero as we condition on… lagged density…
- Contrast with Davis and Weinstein (2002, 2008):
- "Japan’s varied topography highlights the large variation in the natural productivity value of locations, perhaps enough to preclude the existence of multiple spatial equilibria. Consider California, another Ring-of-Fire area with varied topography…. If we were to resettle California starting from a tabula rasa, it seems likely that population would concentrate near the very same fixed factors and in the same locations we see today…”