The Limitations of Economic Counterfactuals : The Case of the Lancashire Textile Industry

The article presents a history of the Lancashire cotton textile industry from the perspective of decision-making entrepreneurs as embedded historical actors, in contradistinction to the economics-based counterfactuals that dominate the recent historiography of the industry.A simulation approach is used to recreate the decision- making parameters faced by entrepreneurs and is used to support a genealogical path-dependent interpretation to overcome the problems of teleology and hindsight. Using historical evidence and evidence from the simulation, a critique of three economics-based counterfactuals is developed. These are the Lazonick counterfactual, the Keynesian counterfactual and the neo-classical counterfactual. It is shown that none of these take into account the full context of the decisions that were taken and none therefore offer a convincing explanation of the collapse of the industry