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Path Dependence


This text is set route dependence in economics and social sciences. For a the same topic in physics, perceive Path dependence (physics).

Path dependence is when the selections presented to of us are reckoning on prior selections or experiences made within the past.[1]

In economics and the social sciences, route dependence refers to both the outcomes at a single deadline, or to long-bustle equilibria of a process. Normally utilization, the phrase implies both:

  1. that “historic past issues”—a large theory,[2] or
  2. that predictable amplifications of minute differences are a disproportionate cause of later cases, and, within the “accurate” build, that this historic dangle-over is inefficient.[3]

Within the principle utilization, (A), “historic past issues” is trivially true in many contexts; every little thing has causes, and on occasion assorted causes result in assorted outcomes. In these contexts, the affirm affect of earlier states are usually now not vital,[4] unlike “route-dependent” alternate choices in finance, where the affect of historic past will likely be non-commonplace.

It’s the slim theory (B), that has the most explanatory pressure, and which is roofed on this article.


The videotape structure warfare is an instance. Three mechanisms honest of product quality might brand how VHS executed dominance over Betamax from a negligible early adoption lead:

  1. A community carry out: videocassette rental shops seen more VHS leases and stocked up on VHS tapes, leading renters to purchase VHS avid gamers and rent more VHS tapes, except there modified into total dealer lock-in.
  2. A VCR manufacturer bandwagon carry out of switching to VHS-manufacturing due to this of they expected it to recall the standards fight.
  3. Sony, the fashioned developer of Betamax, didn’t let pornography companies license their technology for mass manufacturing, which supposed that the bulk pornographic movement pictures launched on video venerable VHS structure.[5]

An substitute prognosis is that VHS modified into larger-adapted to market demands (e.g. having a protracted recording time). In this interpretation, route dependence had tiny to carry out with VHS’s success, which might possibly relish occurred even though Betamax had established an early lead.[6]

Definite feedback mechanisms, fancy bandwagon and community effects, are at the starting place apart of route dependence.[citation needed] They result in a reinforcing sample, by which industries ‘tip’ in the direction of one or any other product believe. Uncoordinated standardisation will likely be seen in many various eventualities.


Path dependence theory modified into at the muse developed by economists to brand technology adoption processes and enterprise evolution. The theoretical suggestions relish had a accurate affect on evolutionary economics.[7]

There are a form of items and empirical cases where economic processes carry out now not development regularly toward some pre-obvious and strange equilibrium, however rather the character of any equilibrium executed relies partly on the technique of getting there. Therefore, the outcomes of a route-dependent process will usually now not converge in the direction of a particular equilibrium, however will as a replacement reach even handed one of several equilibria (on occasion is named animated states).

This dynamic vision of industrial evolution is terribly assorted from the custom of neo-classical economics, which in its simplest build assumed that fully a single can also very smartly be in an enviornment to be reached, no matter initial prerequisites or transitory events. With route dependence, both the place apart to originate and ‘accidental’ events (noise) can relish indispensable effects on the last . In every of the following examples it’s a long way conceivable to establish some random events that disrupted the ongoing route, with irreversible consequences:

QWERTY keyboard

Dvorak keyboard

In economic pattern, it’s a long way declared (at the muse by Paul David in 1985)[8] that a commonplace that is first-to-market can modified into entrenched (fancy the QWERTY structure in typewriters peaceable venerable in pc keyboards). He known as this “route dependence”,[9] and mentioned that corrupt standards can persist just due to the legacy they relish constructed up. That QWERTY vs. Dvorak is an instance of this phenomenon, has been re-asserted,[10] wondered,[11] and is soundless argued.[12] Financial debate continues on the significance of route dependence in determining how standards build.[13]

Economists from Alfred Marshall to Paul Krugman relish famed that the same companies are inclined to congregate geographically (“agglomerate”); opening shut to-the same companies attracts employees with talents in that enterprise, which attracts in additional companies making an attempt to procure expert employees. There can also were no reason to recall one space to any other before the enterprise developed, however because it concentrates geographically, participants in other places are at a jam, and might are inclined to cross into the hub, additional rising its relative effectivity. This community carry out follows a statistical power law within the idealized case,[14] although harmful feedback can happen (through rising native charges).[15]
Investors usually cluster round sellers, and related companies continuously build enterprise clusters, so a focus of producers (at the muse formed by chance and agglomeration) can space off the emergence of many dependent companies within the identical space.[16]

Within the 1980s, the US greenback exchange rate appreciated, decreasing the sector label of tradable items below the worth of manufacturing in many (previously proper) U.S. producers. One of the crucial factories that closed due to this, might later were operated at a (cash-trek with the movement) earnings after greenback depreciation, however reopening would were too pricey. Right here’s an instance of hysteresis, switching obstacles, and irreversibility.

If the economy follows adaptive expectations, future inflation is partly obvious by past abilities with inflation, since abilities determines expected inflation and right here’s a predominant determinant of realized inflation.

A transitory high rate of unemployment within the center of a recession can lead to a completely bigger unemployment rate due to the talents loss (or skill obsolescence) by the unemployed, along with a deterioration of labor attitudes. In assorted words, cyclical unemployment can also generate structural unemployment. This structural hysteresis model of the labour market differs from the prediction of a “pure” unemployment rate or NAIRU, round which ‘cyclical’ unemployment is declared to cross without influencing the “pure” rate itself.

Liebowitz and Margolis distinguish forms of route dependence;[3] some carry out now not imply inefficiencies and carry out now not enlighten the policy implications of neoclassical economics. Supreme “third-level” route dependence—where switching beneficial properties are high, however transition is impractical—comprises this kind of enlighten. They argue that such eventualities can also peaceable be uncommon for theoretical causes, and that no genuine-world cases of non-public locked-in inefficiencies exist.[17] Vergne and Durand qualify this critique by specifying the prerequisites below which route dependence theory will likely be examined empirically.[18]

Technically, a route-dependent stochastic process has an asymptotic distribution that “evolves as a result (purpose of) the process’s relish historic past”.[19] Right here’s usually is named a non-ergodic stochastic process.

In The Idea of the Growth of the Agency (1959), Edith Penrose analyzed how the growth of an organization both organically and thru acquisition is strongly influenced by the abilities of its managers and the historic past of the company’s pattern.


Most up-to-the-minute methodological work in comparative politics and sociology has adapted the conception of route dependence into analyses of political and social phenomena. Path dependence has basically been venerable in comparative-historic analyses of the enchancment and persistence of establishments, whether they be social, political, or cultural. There are arguably two varieties of route-dependent processes:

The severe juncture framework has been venerable to brand the enchancment and persistence of welfare states, labor incorporation in Latin The United States, and the diversifications in economic pattern between international locations, among assorted things.[citation needed] Scholars such as Kathleen Thelen warning that the historic determinism in route-dependent frameworks is enviornment to constant disruption from institutional evolution.

Kathleen Thelen has criticized the software of QWERTY keyboard-sort mechanisms to politics. She argues that such applications to politics are both too contingent and too deterministic. Too contingent within the sense that the initial substitute is commence and flukey, and too contingent within the sense that as soon as the initial substitute is made, an unavoidable route inevitably kinds from which there is now not any such thing as a return.[21]


Paul Pierson‘s influential strive[specify] to conscientiously formalize route dependence inside political science, attracts partly on suggestions from economics. Herman Schwartz has wondered those efforts, arguing that forces analogous to those identified within the industrial literature aren’t pervasive within the political realm, where the strategic order of power provides upward thrust to, and transforms, establishments.

The flow-dependence of emergent approach has been seen in behavioral experiments with people and teams.[22]

Within the social sciences, in particular sociology and organizational theory, a definite but closely related theory to route dependence is the conception of imprinting which captures how initial environmental prerequisites leave a persistent tag (or trace) on organizations and organizational collectives (such as industries and communities), thus continuing to form organizational behaviours and outcomes finally, even as external environmental prerequisites commerce.[23]

Various examples[edit]

  • A total form of route dependence is a typological vestige.
    • In typography, as an illustration, some customs persist, although the reason for their existence no longer applies; as an illustration, the placement of the duration inside a quotation in U.S. spelling. In steel variety, pieces of terminal punctuation, such as the comma and duration, are comparatively minute and restful (as they are able to also peaceable be x-top for true kerning.) Placing the beefy-top quotation tag on the exterior pleasurable the smaller cast steel variety from harm if the phrase wished to be moved round inside or between lines. This would be carried out even though the duration didn’t belong to the text being quoted.
  • Evolution is even handed by some to be route-dependent: mutations going on within the past relish had long-term effects on most up-to-date life kinds, some of that might no longer be adaptive to most up-to-date prerequisites. As an instance, there is a problem about whether the panda’s thumb is a leftover trait or now not.
  • Within the pc and diagram markets, legacy programs point to route dependence: clients’ wants within the expose market usually embody the power to read recordsdata or bustle programs from past generations of products. Thus, as an illustration, a customer might even relish now not merely the correct available phrase processor, however rather the correct available phrase processor that might read Microsoft Discover recordsdata. Such limitations in compatibility make a contribution to lock-in, and more subtly, to believe compromises for independently developed products, within the event that they strive and be smartly friendly. Furthermore perceive embody, prolong and extinguish.
  • In socioeconomic programs, industrial fisheries’ harvest charges and conservation consequences are stumbled on to be route dependent as predicted by the interplay between uninteresting institutional adaptation, mercurial ecological dynamics, and diminishing returns.[24]

Look for also[edit]


  1. ^ Definition from “Our Treasure Of Sewers: A Lesson in Path Dependence”, Dave Praeger, 15 June 2008.
  2. ^ Liebowitz, S.; Margolis, Stephen (2000). Encyclopedia of Regulation and Economics. p. 981. ISBN 978-1-85898-984-6. Most in total, route dependence approach that where we trek next relies now not fully on where we for the time being are, however also upon where we were.
  3. ^ a b Liebowitz, S.; Margolis, S. (September 2000). Bouckaert, Boudewijn; De Geest, Gerrit (eds.). Encyclopedia of Regulation and Economics, Volume I. The History and Methodology of Regulation and Economics (PDF). Cheltenham: Edward Elgar. p. 985. ISBN 978-1-85898-984-6. Retrieved 2010-05-20. route dependence will likely be dilapidated (the effectivity of the chosen route is tied with some conceivable selections), semi-accurate, (the chosen route is now not the correct however now not worth fixing, or accurate (the chosen route is highly inefficient, however we are unable to lawful it).
  4. ^ Bellaïche, Joël (March 2010). “On the route-dependence of industrial boost”. Journal of Mathematical Economics. 46 (2): 163–178. doi: 10.1016/j.jmateco.2009.11.002.
  5. ^ M.Admin (2014-03-05). “Betamax Did now not Lose To VHS Because Of Adult Motion photos”. KnowledgeNuts. Retrieved 2019-08-06.
  6. ^ Liebowitz, Stan (2002). Re-pondering the Community Financial system. Contemporary York. p. 41. ISBN 978-0-8144-0649-6. It modified into the corrupt playing time that led to the death of the Betamax, now not the incontrovertible truth that it modified into first or second or third.
  7. ^ Nelson, R; Winter, S (1982). An evolutionary theory of industrial commerce. Harvard College Press.
  8. ^ Stack, Martin; Gartland, Myles (2003). “Path Creation, Path Dependency, and Replacement Theories of the Agency”. Journal of Financial Factors. 37 (2): 487. doi: 10.1080/00213624.2003.11506597. S2CID 155562359. Paul David and Brian Arthur printed several papers that for the time being are even handed the foundation of route dependency (David 1985; Arthur 1989, 1990).
  9. ^ David, Paul A. (1985). “Clio and the Economics of QWERTY” (PDF). The American Financial Review. 75 (2): 332–337. ISSN 0002-8282. JSTOR 1805621.
  10. ^ Diamond, Jared (April 1997). “The Curse of QWERTY”. Inquire Magazine.
  11. ^ Liebowitz, S. J.; Margolis, S. E. (April 1990). “The Story of the Keys”. Journal of Regulation and Economics. 30: 1–26. doi: 10.1086/467198. S2CID 14262869. SSRN 1069950. we supply out that QWERTY is set as true a believe as any substitute
  12. ^ David, Paul A. (5–12 September 1999). At Final, a Resolve for Power QWERTY-skepticism!. European Summer season College in Industrial Dynamics (ESSID). l’Institute d’Etudes Scientifique de Cargèse (Corse), France.
  13. ^ Puffert, Douglas (2008-02-10). “Path Dependence”. Retrieved 20 Could well additionally 2010.
  14. ^ D’Souza, Raissa M.; et al. (2007). “Emergence of Tempered Preferential Attachment from Optimization”. Proc. Natl. Acad. Sci. USA. 104 (15): 6112–6117. doi: 10.1073/pnas.0606779104. PMC 1839059. PMID 17395721.
  15. ^ Jennen, M.; Verwijmeren, P. (2009). “Agglomeration Outcomes and Monetary Efficiency”. Metropolis Compare. 47 (12): 2683–2703. doi: 10.1177/0042098010363495. ssrn 1009226.
  16. ^ Jen Nelles, Allison Bramwell and David Wolfe (2005). Global Networks and Local Linkages: The Paradox of Cluster Construction in an Originate Financial system (PDF). Montreal and Kingston: McGill-Queens College Press for Queen’s College of Coverage Compare. p. 230. ISBN 978-1-55339-047-3. Archived from the fashioned (PDF) on 2016-06-04. Retrieved 2010-05-20.
  17. ^ Stephen E. Margolis; S. J. Liebowitz. “Path Dependence 4. Evidence for Third-Degree Path Dependence. Retrieved 20 Could well additionally 2010. Our finding out of the proof is that there are as but no confirmed examples of third level route dependence in markets.
  18. ^ Vergne, J. P.; Durand, R. (2010). “The Missing Hyperlink Between the Idea and Empirics of Path Dependence: Conceptual Clarification, Testability Direct, and Methodological Implications”. Journal of Administration Compare. 47 (4): 736. doi: 10.1111/j.1467-6486.2009.00913.x. S2CID 107050516. In explicit, we recommend inviting a long way from historic case research of supposedly route-dependent processes to focal point on more managed research designs[,] such as simulations, experiments, and counterfactual investigation.”
  19. ^ David, Paul (2005). Evolution and route dependence in economic suggestions: past and expose. Edward Elgar. p. 19. ISBN 978-1-84064-081-6. as in total is the case for branching processes [in Path dependence, its critics and the quest for ‘historical economics’]
  20. ^ Page, Scott E. (2006-01-26). “Path Dependence” (PDF). Quarterly Journal of Political Science. 1 (1): 87–115. doi: 10.1561/100.00000006. Archived from the fashioned (PDF) on 2016-06-29.
  21. ^ Thelen, Kathleen (1999). “Historical Institutionalism in Comparative Politics”. Annual Review of Political Science. 2 (1): 369–404. doi: 10.1146/annurev.polisci.2.1.369. ISSN 1094-2939.
  22. ^ Egidi, Massimo; Narduzzo, Alessandro (October 1997). “The emergence of route-dependent behaviors in cooperative contexts”. World Journal of Industrial Group. 15 (6): 677–709. doi: 10.1016/S0167-7187(97)00007-6. [Some test subjects] adopted a approach as soon as and for all[,] and insisted on using it[,] even when the configurations couldn’t be efficiently played with the approach adopted.
  23. ^
    Marquis, Christopher; Tilcsik, András (2013). “Imprinting: In direction of A Multilevel Idea”. Academy of Administration Annals: 193–243. SSRN 2198954.
  24. ^ Tekwa, Edward W.; Fenichel, Eli P.; Levin, Simon A.; Pinsky, Malin L. (2019-01-08). “Path-dependent establishments force substitute accurate states in conservation”. Court docket cases of the National Academy of Sciences. 116 (2): 689–694. doi: 10.1073/pnas.1806852116. ISSN 0027-8424. PMC 6329967. PMID 30567975.


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