ABSTRACT
This chapter examines the basis of the claim that “history matters” in mainstream multiple equilibria models through the medium of one of P. R. Krugman’s models. It explores intentional human agency as a superior route for introducing history into a model, outlining the open systems–ceteris paribus approach and provides an example of its application. Multiple equilibria were viewed as undesirable because they seemed to imply indeterminacy and with indeterminacy came an inability to predict economic outcomes, an age-old objective for economists. A modeling methodology that provides the requisite role for intentional human agency, and that seems consistent with the heterodox tradition of post-Keynesian economics, is the so-called open systems-ceteris paribus approach that has been advocated by Setterfield. The limited conception of history as the importance of initial conditions is also a problem with approaches that attempt to model a process of historical growth using the theory of complex dynamics, otherwise known as “chaos” theory.
