The Review of Austrian Economics, 14:1, 65–96, 2001.
2001 Kluwer Academic Publishers. Manufactured in The Netherlands.
The Market Process and the Economics
of QWERTY: Two Views
School of Management, University of Texas at Dallas, P.O. Box 830688, Richardson, TX 75083-0688
Received March 2000; Accepted October 2000
Abstract. Since its publication in 1985 Paul David’s “Economics of QWERTY” has provided a paradigm case for
the understanding and application of path-dependent processes in economics, some of which have been identiﬁed
as yielding sub-optimal outcomes. The accuracy and relevance of this case, and this entire theoretical approach,
has been subjected to critical scrutiny by Stan Liebowitz and Stephen Margolis in a series of articles and in a
recent book. In this article I provide a wide ranging, and largely appreciative, review of the book and highlight, in
some detail, the fundamental disagreements with which it deals.
Key Words: path-dependence, network effects, lock-in, QWERTY, burden if proof
JEL classiﬁcation: B41, L40, N00.
1. Introduction and Overview
1.1. What is the Real Discussion About?
Allow me to simplify a bit.
What do Austrian economics (in some of its versions) and Keynesian economics (in some
of its versions) have in common? Answer: They are both highly critical of neoclassical
economics—the kind that assumes perfect knowledge, perfect foresight, many traders, etc.,
the kind that derives perfect competition as a Pareto optimal efﬁcient standard against which
This is a wide ranging review-article of Liebowitz and Margolis 1999. The following people graciously read
earlier drafts and provided extremely helpful comments, Steven Horwitz, Sam Westin and Robert Formaini. I
would also like to thank the participants of the J M Kaplan Workshop in Politics, Philosophy and Economics at
George Mason University, particularly Pete Boettke, Mario Rizzo, Don Lavoie, Richard Wagner, Rebecca Menes,
Marc Brady, and Nicola Tynan. The article is much better because of their comments, but whatever errors remain
are mine alone. I have also had very helpful discussions with Stan Liebowitz and Stephen Margolis, but I must
clearly distance them not only from my errors but also from any presumed association with of the views I have
expressed. At the time that the ﬁrst few drafts were produced I was completely unaware of the online discussion
that had occurred in November and December 1999 on the EH.NET discussion site and, more importantly, of
Paul David’s latest paper which stimulated that discussion (David 1999b). The latter anticipates (but does not
satisfactorily answer) much of the thrust of my argument very closely in substance, and even in terminology,
(particularly in Section 4.1). I have, in revision, tried to take account of these contributions.