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.