Irreversibility in Economics

Charles Perrings and William A. Brock

Annual Review of Resource Economics, 2009, vol. 1, issue 1, pages 219-238

Abstract: Three independent literatures have contributed to the understanding of irreversibility in economics. The first focuses on the future opportunities forgone by investments with irreversible consequences. The second considers irreversibility (and hysteresis) in the context of the dynamics of systems characterized by multiple equilibria. The third, with roots in complex systems theory, focuses on entrainment—a phenomenon recognized in economics as lock-in or lock-out. This paper disentangles the different strands in the economic analysis of irreversibility in order to identify the core ideas involved and to connect them to arguments in the parallel literatures on sustainability and uncertainty.

Keywords: irreversibility; uncertainty; option value; quasi-option value; entrainment (search for similar items in EconPapers)
JEL-codes: C61 D81 (search for similar items in EconPapers)
Date: 2009
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