Some Notes on the Role of History and the Definition of Hysteresis and Related Concepts in Economic Analysis

Abstract

It is commonplace that history has an impact on present behavior. Events such as the discovery of America, the Industrial Revolution, the two World Wars, and, most recently, the decline of communism and the collapse of the Soviet empire have each, in their turn, changed lives in such a way as to make a reversion to preexisting worlds impossible. Not surprisingly, then, historical effects have begun to be noticed in economic analysis. Thus, for example, Georgescu-Roegen (1950) has argued that an individual's demand for goods might depend on his past experience. In particular, temporary price and (or) income changes causing a reallocation of purchases could, as a result of his experience with the new purchases, bring about a permanent change in his preferences. Even with the old prices and income restored, then, the individual would not return to his original position. And Phelps (1972, pp. xxii,