CONCEPT
The Technology Trap
Douglass North’s diagnosis of the growing misalignment between path-dependent institutional legacies and the economic reality a new technology has created—not a trap set by the technology itself but by the rational investments in the institutions of a previous technological era that now resist the changes the new technology requires.
When a new technology transforms the conditions of economic life, the institutions designed for the previous technology do not automatically adapt. They persist—not through anyone’s malice or stupidity, but through the structural mechanism that Douglass North identified as
path dependence: the investments in skills, organizations, and strategies that the existing institutional framework made rational to undertake create constituencies with a vested interest in the framework’s persistence, because changing the framework would devalue those investments. The technology trap is the name for the condition that results: institutions that were rational when they were designed, that served real purposes and reduced real
transaction costs, but that were designed for conditions that no longer exist—and whose persistence through path dependence creates a growing gap between the institutional framework and the economic reality it is supposed to govern. The AI transition has produced a technology trap of unusual breadth