Clio and the economics of qwerty

(Paul A. David)

1867C. L. Sholes, a printer by trade, helped by his friends C. Glidden and S.W. Soule, built a primitive writing machine.

1867J. Densmore, the promoter-venture capitalist, struggled Sholes to perfect the machine. To reduce the frequency of typebarclashes, it was developed a four-row keyboard similar as the modern Qwerty.

1873Qwerty’s evolution was completed by Remington’s ( a famous arms maker) mechanics.

1878Remington brought out its Improved Model Two.

1870’sEconomic downturn of the 1870’s was not the best times in which to launch a brand new product of office equipment costing 125$.

1880’sThe typewrtiter boom begin.

1879Crandall was the second inventor to reach the American market.

1892Blickensderfer first sported a keyboard arrangement which was more sensible than qwerty. This “Ideal” keyboard placed in the bottom row the most commonly used letters, DHIATENSOR

1895-1905During this period the main producers of typewriters offered the Universal as an option of the Ideal keyboard.

1940Us Navy experiments had shown that the increased efficiency obtained with dskwould amortize the cost of retraining a group of typists within ten days.

1936 A. Dvorak patented the DSK (dvoraksimplified keyboard).

2005Barbara Blackburn earned the fastest typist Guinness Wolrd Record typing 150wpm for 50 minutes.

Here the answer to the question: «Why does the entire world use the most inefficient keyboard?»

Is the requirement for system compatibility between keyboard "hardware" and the "software" represented by the touch typist's memory

There aren’t

learning

costs for

industries

The most

part of

typewriters

use QWERTY

Typists use

what they

usually use

QWERTY is

universal

AC= TC

Q

The raise of QWERTY’s users reduce production costs

In a world where typists haven’t anypreference about which kind of keyboard to use and typewriter producers follow typist’s preference, a typist will probably choose the same keyboard chosen by the precedenttypist.

When the switching costs became extremelyhigh, nobody will change his production to offer a typewriter with an alternative keyboard

Sorry, Do youhave a PC with

AZERTY keyboard?

No, I don’t. Only

QWERTY

No problem! I’ll take QWERTY

“A path dependent sequence of economic changes is one of which important influences upon the eventual outcome can be exerted by temporally remote events, including happenings dominated by chance elements rather then the systematicforces.” (P. David)

No value judgment is involved unless one sayssomething like “efficiency is good” or “a more efficientoutcome is a favourite outcome”.

We believe that individual preferences tought to count in deciding what economic outcomes are preferable.

IF WHAT IS “EFFICIENT” IS DEFINED AS WHAT THE “PEOPLE PREFER”, HOW COULD WE NOT BE FOR IT?

In the typewriter case, one may able to argue that, a keybordlayout that is able to unambiguously deliver a faster typingspeed would definitely be preferred by everyone concerned

BUT…

◦ In deciding matters of efficiency, THE DISTIBUTION OF GAINS BETWEEN INDIVIDUALS IS NOT RELEVANT!

This judgment may be couched in Pareto efficiency terms by nothing that the truly “superior” keybord would be able to deliver cost savings in excess of the losses suffered by thosewedded to an “inferior” one.

Equilibrium is closely connected to the concept

of efficiency.

The whole process is driven by differences in opinion and perceptionbetween rival producers and enterpreneurs.

Where people have different expectations about the same situation, atmost one of them can be right.

◦ Equilibrium values might depend on the path taken to get to equilibrium.

And to quote Tolstoy:

“(e) very action of theirs, that seems to them an act

of their own free will, is an historical sense not free

at all, but in bondage to the whole course of

previous history” (War and Peace)

Path dependence gains added relevance because it’s seen to attach to system that exhibit network-effects.

◦ The fact that the benefits of being in the network depend on how many individuals already belong amongcompeting networks, whichever gets started first mayforeclose the development of the others simply by virtueof being there first, and not from any economic merit.

This could then be seen as a “market failure”… a failure of the market to unfailingly deliver the “best” standard.

The lock-in may or may not be a problem. It’s only a problemif we become locked-in to an inferior standard.

It is impossible to know how keyboard’s writers

will change their behaviors, but we can only know how the market

will be following this way.

Pro: continuing to use a inefficient standard (instead of using

Dvorak technology that is more efficient and faster than

QWERTY)

Against: QUERTY is efficient (the cost of retraining for DSK is too

expensive)

Can we imagine a keyboard’s market without the path-dependence ?

No cost of rertaining

Competitive Market

INDUSTRY RIVALRY

(Medium)

• High concentration (competitors: Azerty; QWERTZ; DSK; Dhiatensor)

• Low diversity of competitors• Low product differentiation• Similar cost conditions

BUYER POWER

(High)

• High price sensitivity

SUPPLIER POWER

(No)

• in this case we can assume a vertical backward integration

THREAT OF ENTRY

(High)

• High economies of scale

SUBSTITUTECOMPETITION

(Low)

• Low buyers’propensity to substitute• Low substitution rate

No path-dependence

Industy

Rivality

(Medium)

Buyer

Power

(High)

Sobstitute

Competition

(Low)

Supplier

Power

(No)

Threat of

Entry

(High)