CUMULATIVE CAUSATION,
CORRIDOR OF DIVERGENCE AND
INSTITUTIONAL MATRICES
Svetlana Kirdina
Institute of Economics,
Russian Academy of Sciences,
Moscow
AFIT at WSSA
April 10-12, 2013, Denver, Colorado
The main idea of the paper
Is to develop Veblenian ideas of cumulative
causation as well as Marxian historical
materialism to explain the permanent
dichotomy of social and economic systems in
the world.
 An institutional matrices theory (Kirdina, 2001,
2003 …) develops both these ideas and shows
two attractors for social and economic
trajectories within the corridor of divergence.

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AFIT, Denver, Colorado, April 10, 2013
Cumulative causation
Cumulative causation (CC) principles have been
investigated in different spheres of economic analysis.
They demonstrate a “positive feedback” approach to the
social and economic change and emphasize the circular
and cumulative character in the process.
Nanako Fujita (2004) shows three origins and currents of
CC theory: 1) Veblenian CC theory (1898); 2) Wicksellian
CC theory (1898); 3) Young-Kaldor type CC theory
(1928).


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AFIT, Denver, Colorado, April 10, 2013
Veblenian CC theory
Thorstein Veblen focused on the “institutional change”
and stressed the necessity of “theories of a
comprehensive process by the notion of a cumulative
causation” (Veblen 1898, p. 377-378).Veblen applied the
Darwinian principles of variation, inheritance and
selection to institutional evolution. The process of
historical evolution of institutions, according to Veblen, is
‘the natural selection of institutions’, “a scheme of blindly
cumulative causation, in which there no trend, no final
term, no consummation” (Veblen, 1907, p. 304), which
“transforms the entire society in a myriad of different
ways” (McCormick, 2006, p. xxi).

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Not only divergence
We can see, indeed, that there is not always only a
divergent process in the real world. Actual path
dependency concept develops alternative ideas. It is a
broad concept that "history matters". In means that
“where we go next depends not only on where we are
now, but also upon where we have been" (Liebowitz,
Margolis, 2000, p. 981). We are able to correct a
historically chosen path and institutions but we are unable
to dramatically change them. As Bellaïche meant, "the
phenomenon of dependence of history might be ignored
for short period of time (10 years, 20 years), but is not
negligible for secular comparisons" (Bellaïche, 2010, p.
178).

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On stable institutional structures
Of course the modern society of Great Britain or China
is not just a larger replica of the society of several
hundred years ago. It is dramatically different in most
every aspect of social life. But we can suggest that some
institutional structures retain their contents. As
Schumpeter wrote about market institution, e.g.: “as far as
it goes about market economy, for fundamental theory it
makes no difference what kind of market economy it is: a
system of primitive exchange between hunters and
fishermen or a complex organism that we can see today"
(Schumpeter, 1926, s. 74). An institutional matrices theory
(Kirdina, 2001; 2012; 2012a) deals with such kind of
permanent macro-structures.

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Main preconditions of Institutional
Matrices Theory (or X- and Y- Theory)



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Each sphere (economy, politics and ideology) is
regulated or guided by a particular set of basic
institutions made-in-a-society’s image (i.e. reflexively).
Economic, political and ideological institutions
represent the “institutional matrix” of human societies
and as such can be studied by political economists,
economic sociologists and other scholars.
Two main types of institutional matrices can be
identified: the X-matrix and the Y-matrix.
AFIT, Denver, Colorado, April 10, 2013
X- and Y-matrices
Redistributive economy
X
Y
Market economy
* Redistributive economy with the Center * Market (exchange)
mediating economic transactions
economy
* Centralized political order
* Federative political order
(top-down model)
(bottom-up model)
* Communitarian ideology
* Individualistic ideology
(We over Me)
(I over We)
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Institutions of X- and Y-matrices
in the economy and their functions
Functions of institutions
X-institutions
Y-institutions
1. Regulating access to
goods (property rights
system)
Supreme conditional
ownership
Private ownership
2. Transfer of goods
Redistribution
(accumulationcoordinationdistribution)
Exchange
(buying-selling)
3. Interactions between
economic agents
Cooperation
Competition
4. Labor system
Employed (unlimited
term) labor
Hired (short and
medium term) labor
5. Feed-back loops
(effectiveness indexes)
Cost limitation
(Х-efficiency)
Profit maximization
(Y-efficiency)
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Institutions of X- and Y-matrices in
politics and their functions
Functions of institutions
X-institutions
Y-institutions
1.Territorial administrative
organization of the state
Administrative system
(unitarity)
Federative structure
(federation)
2. Governance system
(decision making)
Vertical hierarchical
authority with Centre on
the top
Self-government and
subsidiarity
3.Type of interaction in the
order of decision making
General assembly and
the rule of unanimity
Multi-party system and
the rule of democratic
majority
4. Access to governing
positions
Appointment
Election
5. Feed-back loops
Appeals to higher levels
of hierarchical authority
Legal suits
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Institutions of X- and Y-matrices in
ideology and their functions
Functions of institutions
X-institutions of
communitarian ideology
Y-institutions of
individualistic
ideology
1. Core principle of social
action
Collectivism
Individualism
2. Normative
understanding of social
structure
Egalitarianism
Stratification
3. Prevailing social values
Order
Freedom
4. Labor attitudes
Well-being-oriented
Pecuniary-oriented
5. Principles of common
thinking
GeneralizationIntegralism/Holism
SpecializationAtomization/Mereism
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Combinations of governing and
complementary institutional matrices
Y
Y
X
X
Russia, China, India,
most Asian, Middle Eastern,
Latin American as well as
some other countries
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Europe and Western
Offshoots: the USA,
Canada, Australia,
and New Zealand
AFIT, Denver, Colorado, April 10, 2013
Why do X- or Y-matrix institutions
prevail?

The material and technological environment of a
society is a key determinant for the prevalence of
either X- or Y- matrices.



The environment can be a communal, indivisible system,
under which the removal of some elements can lead to the
disintegration of the entire system, OR
The environment can be non-communal, that is, with
opportunities for technological division and possibilities for
separate individual usage.
In a communal environment the X-matrix institutions
are dominant and the Y-matrix institutions are
complementary. In a non-communal environment it is
the opposite.
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Preservation of the leading position of
one or the other matrix in the history of
nation-states

Historical research shows that the prevalence of one or the
other matrices has a steady character. Even if, by virtue of
external pressures or under influence of distorted internal
reasons, attempts are made to replace one dominant matrix
(X- or Y-) with the other subordinant matrix (Y- or X-), such a
situation of outright reversal is, as a rule, short-lived (in
historical time). For example, attempts at systematic
institutional change in Eastern Europe under influence of the
USSR or the countries of Latin America under pressure of the
USA.
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Proportion of GDP produced by countries with a prevailing X- and
Y-matrix, 1820-2010 (Maddison Data Base, sample of 34
nations~75% of World GDP)
X-matrix countries: China, India, Japan, Brazil and former USSR countries.
Y-matrix countries: Western Europe including Austria, Belgium, Denmark,
Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland
and United Kingdom, and
Western Offshoots including the United States, Canada, Australia, New Zealand.
70%
Percentage in global GDP
60%
50%
40%
X-GDP
Y-GDP
30%
20%
10%
0%
1820
15
1850 1870 1890 1910 1930 1950 1970 1990 2010
AFIT, Denver, Colorado, April 10, 2013
Corridor of divergence


Waves of divergence reflect cyclical interdependence between Xand Y-matrix countries. Looking at the above mentioned figure we
could assume the existence of ‘a corridor of divergence.’ There are
two attractors, namely X- and Y-prevailing matrices’ countries. Such
a corridor is designed in a future oriented way and represents an
open space for global development between two axes representing
the attractors. There are boundaries of ‘a corridor of divergence’: on
average, the share of one type countries (with X- or Y-prevailing
matrix) couldn’t be less than one third and more two thirds.
Here we understand divergence not in a sense of the increasing
distance between the richest people/nations in the world and the
very poorest people/nations or between top and bottom incomes.
We consider an institutional divergence or varieties of institutions
performed people to organize a social and economic life.

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Conclusion

It is the theoretical challenge to identify conditions and
mechanisms pushing institutional change toward
homogenization or divergence. An approach based on
the institutional matrices theory (IMT), or X- and Ytheory, in this context helps us to investigate the
contours of contemporary global trends and provides a
methodology for institutional studies considering the
world economy into an interdependent whole.
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Thank you for
your attention!
kirdina@bk.ru
www.kirdina.ru
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AFIT, Denver, Colorado, April 10, 2013