Network Technologies Drive the Economy

I am reading the book, The Microeconomics of Complex Economies: Evolutionary, Institutional, Neoclassical, and Complexity Perspectives by Wolfram Elsner, Torsten Heinrich, and Henning Schwardt, and I came across this statement:

“Network technologies with their network externalities in use have thus come to govern largely the dynamics of the economy, and an efficient individualistic (i.e., autonomous) maximization is becoming a near-to-irrelevant exemption, as it would fail to take the decisions of others and the external effects of one’s own and the others’ choices into account (see, e.g., Hutter, 2001; Nagler, 2008).”

I think they are exactly right, and while the book focuses on macroeconomics, network externalities are very important (maybe more important) in understanding the functioning of macroeconomics at any level. In actuality, the distinction between the relevance in microeconomics vs. macroeconomics may be a false dichotomy, but either way, it is imperative that network effects become more of the mainstream in both broad branches of economics.

By the way, while I am only on chapter 4 of the book, I have found it to be excellent. It is very well written and thought-provoking. If you have any interest in these topics, I highly recommend you give it a read.

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