AN INCREASING RETURNS CHRONOLOGY
This chronology is a supplement to my Slate article "The legend of Arthur". Since the severity of that articleís claims may raise disbelief - surely his claims to have introduced increasing returns to economics canít be a complete fraud - I thought this might be useful.
A number of economic theorists - Mike Spence, Avinash Dixit, Joe Stiglitz, Kelvin Lancaster, Steve Salop- develop theoretical models of "monopolistic competition", that is, competition under conditions of increasing returns. Perhaps the most influential of these papers is that by Dixit and Stiglitz in the American Economic Review, 1977; other economists take note and begin looking for ways to make use of the new theoretical tools.
Several international trade theorists independently develop monopolistic competition models of trade; I win the race to publication by a nose, getting "Increasing returns, monopolistic competition, and international trade" into print that November.
Brian Arthur, by his own account, first begins thinking about increasing returns; he talks to Victor Norman in November, and comes away believing that Norman cannot understand the idea.
Dixit and Normanís book, Theory of International Trade, which was in galleys during 1979, is published; one chapter is devoted to increasing returns. An international network of economists working on increasing returns and international trade begins to form.
Brian Arthur is thinking and talking about increasing returns, but hasnít written anything yet.
Elhanan Helpman of Tel-Aviv University publishes a classic paper that integrates increasing returns with conventional theories of international trade. Mike Spence publishes "The learning curve and competition", which shows how increasing returns in high-technology industries lead to the domination of markets by a small number of firms.
Brian Arthur is still thinking about increasing returns.
A major conference on increasing returns and international trade takes place in Geneva, marred only by the absence of Helpman, who is invading Lebanon that week. By this time the area has a name: the "new trade theory". My own work on increasing returns gets me tenure at MIT.
Brian Arthur continues to think about the subject.
Paul Romer completes his dissertation at the University of Chicago, on increasing returns and economic growth; soon his work becomes the basis of the "new growth theory". Meanwhile, Helpman and I decide that the proliferation of papers in the "new trade theory" has reached the point where a synthesis is needed; we begin writing our magnum opus, Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy.
Brian Arthur finally writes a paper.
Helpman and I complete our work on Market Structure and Foreign Trade. Also, the Handbook of International Economics, published that year, contains Helpmanís survey chapter "Increasing returns, imperfect markets, and trade theory".
Brian Arthurís paper is rejected on its first submission for publication,
and his seminar at Harvard goes badly. He concludes that economists are
simply unwilling to admit that increasing returns exist.