Information Dynamics and Self-Reinforcing Processes

ABSTRACT : This paper surveys the landscape of knowledge- and information-driven self-reinforcing processes, drawing together diverse strands from development economics, network theory, institutional economics, and complexity science. The analysis begins with the non-rivalrous nature of knowledge — the property by which an idea, once shared, diminishes no one's possession of it — and shows how this characteristic underlies a broad class of increasing-returns phenomena. From this foundation, the paper examines self-fulfilling prophecies, self-enforcing conventions, network externalities, and the divergent dynamics captured by the Matthew Principle ("the rich get richer, the poor get poorer"). Vicious and virtuous circles are formalized through Schelling's critical-mass framework, in which a cumulative distribution of individual thresholds, compared against a 45-degree line, reveals low-level and high-level equilibria separated by an unstable critical mass. The paper then develops a symmetric taxonomy of policy interventions: to escape a vicious circle, practitioners may pursue a "big push" to surpass the critical threshold or "grease the wheels" to destabilize the low-level equilibrium; to protect a virtuous circle, they may mount a "big pull-back" or employ "sand in the gears" to increase its stability. A final category of interventions — opting out entirely via circuit breakers, safety nets, or inalienable rights — removes certain domains from self-reinforcing dynamics altogether. The analysis is illustrated throughout with historical and contemporary examples spanning financial markets, education, social capital, urban economics, and international development.