Ratchet Effect - Examples

Examples

Famine cycle

Garrett Hardin, a biologist and environmentalist, used the phrase to describe how food aid keeps people alive who would otherwise die in a famine. They live and multiply in better times, making another bigger crisis inevitable, since the supply of food has not been increased.

Governance

Austrian school economist Robert Higgs used the term to describe the seemingly irreversible expansion of government in times of crisis in his book Crisis and Leviathan. Similarly, governments have difficulty in rolling back huge bureaucratic organizations created initially for temporary needs, e.g., at times of war, natural or economic crisis. The effect may likewise afflict large business corporations with myriad layers of bureaucracy which resist reform or dismantling.

Production strategy

The ratchet effect can denote an economic strategy arising in an environment where incentive depends on both current and past production, such as in a competitive industry employing piece rates. The producers observe that since incentive is readjusted based on their production, any increase in production confers only a temporary increase in incentive while requiring a permanently greater expenditure of work. They therefore decide not to reveal hidden production capacity unless forced to do so.

Game theory

The ratchet effect is central to the mathematical Parrondo's paradox.

Cultural anthropology

In 1999 comparative psychologist Michael Tomasello used the ratchet effect metaphor to shed light on the evolution of culture. He explains that the sharedness of human culture means that it is cumulative in character. Once a certain invention has been made, it can jump from one mind to another (by means of imitation) and thus a whole population can acquire a new trait (and so the ratchet has gone "up" one tooth).