Technology lock-in is a form of economic path dependence whereby the market selects a technological standard and because of network effects the market gets locked-in or stuck with that standard even though market participants may be better off with an alternative. It has been suggested that technology lock-in represents a market failure or inefficiency when an inferior standard, from the alternatives available, is chosen. Economists who believe that technological lock-in on the free market leads to the potential of an inferior choice often propose that governments or mandatory industry boards step in to correct the supposed market failure.
Technology lock-in and market failure
The idea that technology lock-in is an example of market failure warranting government intervention has received a number of criticisms. Firstly, even if a market does get locked-in to an "inferior" standard this in no way suggests that governments can step in and select the most optimal choice. The belief that they could do so assumes that they have greater foresight then market participants and furthermore faces the same problems that any form of central planning inevitably encounters.
Secondly empirical examples of actual technological lock-in are scarce, the most famous example put forth being that between keyboard layouts which has been controversial and is suggested by many to be a myth. The keyboard example is based on the competition in the early 20th century between to two keyboard layouts, QWERTY (the standard currently in use) and an alternative known as Dvorak. An article by economist Paul David in 1985 suggested that Dvorak was in fact a superior layout, but because of technological lock-in it was never chosen by the market. However, subsequent articles have re-examined David's conclusions, such as a paper by economists Stan Liebowitz and Stephen Margolis titled The Fable of the Keys, suggesting that the view that the Dvorak keyboard is in fact superior is suspect and that the historical evidence of superiority put forth by David is flawed and incomplete.
- Spulber, Daniel. "Famous Fables of Economic – Myths of Market Failures", 2002, page 12-14.
- Liebowitz , S and Margolis, S. "The Fable of the Keys", 1990.