What is O-ring theory in Economics?

October 24, 2018 12:15 am | Updated 12:15 am IST

Also known as the O-ring model of economic development, this refers to the theory that even the smallest components of a complex production process must be performed properly if the end product of the process is to have any useful value. In other words, a mistake that creeps into even the smallest of tasks can cause the final product to possess absolutely no value to users. The O-ring theory derives its name from a 1986 incident in which the Challenger space shuttle was completely destroyed as a result of the failure of a simple gasket, or O-ring, to work properly. It was first proposed by American development economist Michael Kremer in 1993.

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