Path dependence

Path dependence is a concept in the social sciences, referring to processes where past events or decisions constrain later events or decisions.^[1][2] It can be used to refer to outcomes at a single point in time or to long-run equilibria of a process.^[3] Path dependence has been used to describe institutions, technical standards, patterns of economic or social development, organizational behavior, and more.^[4][1]

In common usage, the phrase can imply two types of claims. The first is the broad concept that "history matters," often articulated to challenge explanations that pay insufficient attention to historical factors.

1. A
   videocassette rental stores observed more VHS rentals and stocked up on VHS tapes, leading renters to buy VHS players and rent more VHS tapes, until there was complete vendor lock-in
   .
2. A VCR manufacturer bandwagon effect of switching to VHS-production because they expected it to win the standards battle.
3. Sony, the original developer of Betamax, did not let pornography companies license their technology for mass production, which meant that nearly all pornographic motion pictures released on video used VHS format.^[8]

An alternative analysis is that VHS was better-adapted to market demands (e.g. having a longer recording time). In this interpretation, path dependence had little to do with VHS's success, which would have occurred even if Betamax had established an early lead.^[9]

QWERTY keyboard

Dvorak keyboard

Keyboard layouts

QWERTY keyboard

The QWERTY keyboard is a prominent example of path dependence due to the widespread emergence and persistence of the QWERTY keyboard. QWERTY has persisted over time despite more efficient keyboard arrangements being developed –

The standard gauge of railway tracks is another example of path dependence which explains how a seemingly insignificant event or circumstance can change the choice of technology over the long run despite contemporary knowhow showing such a choice to be inefficient.[13]

More than half the world's railway gauges are 4 feet 8+1⁄2 inches (143.5 cm), known as

In the 20th and 21st centuries when the break of gauge problem was seen as increasingly undesirable, several countries regauged existing railways to standard 1435 mm gauge, but in some countries such as in India – mostly due to path dependence – it was decided to regauge narrow gauge lines to Indian gauge rather than standard gauge.

In constructing

There are many models and empirical cases where economic processes do not progress steadily toward some pre-determined and unique equilibrium, but rather the nature of any equilibrium achieved depends partly on the process of getting there. Therefore, the outcome of a path-dependent process will often not converge towards a unique equilibrium, but will instead reach one of several equilibria (sometimes known as absorbing states).

This dynamic vision of economic evolution is very different from the tradition of

Economic development

In economic development, it is said (initially by

Economists from Alfred Marshall to Paul Krugman have noted that similar businesses tend to congregate geographically ("agglomerate"); opening near similar companies attracts workers with skills in that business, which draws in more businesses seeking experienced employees. There may have been no reason to prefer one place to another before the industry developed, but as it concentrates geographically, participants elsewhere are at a disadvantage, and will tend to move into the hub, further increasing its relative efficiency. This network effect follows a statistical power law in the idealized case,^[22] though negative feedback can occur (through rising local costs).^[23] Buyers often

If the economy follows adaptive expectations, future inflation is partly determined by past experience with inflation, since experience determines expected inflation and this is a major determinant of realized inflation.

A transitory high rate of

Liebowitz and Margolis distinguish types of path dependence;[25] some do not imply inefficiencies and do not challenge the policy implications of neoclassical economics. Only "third-degree" path dependence—where switching gains are high, but transition is impractical—involves such a challenge. They argue that such situations should be rare for theoretical reasons, and that no real-world cases of private locked-in inefficiencies exist.^[26] Vergne and Durand qualify this critique by specifying the conditions under which path dependence theory can be tested empirically.^[27]

Technically, a path-dependent stochastic process has an

In The Theory of the Growth of the Firm (1959), Edith Penrose analyzed how the growth of a firm both organically and through acquisition is strongly influenced by the experience of its managers and the history of the firm's development.

Conditions which give rise to path dependence

Path dependence may arise or be hindered by a number of important factors, these may include

• Durability of capital equipment
• Technical interrelatedness
• Increasing returns
• Dynamic increasing returns to adoption^[29]

Social sciences

Institutions

Recent methodological work in comparative politics and sociology has adapted the concept of path dependence into analyses of political and social phenomena. Path dependence has primarily been used in

• One is the
  self-reinforcement (which creates forces sustaining the decision).^[30]
• The other path-dependent process deals with reactive sequences where a primary event sets off a temporally-linked and causally-tight
  industrial revolution in England with the development of the steam engine
  .

Kathleen Thelen has criticized the application of QWERTY keyboard-style mechanisms to politics. She argues that such applications to politics are both too contingent and too deterministic. Too contingent in the sense that the initial choice is open and flukey, and too deterministic in the sense that once the initial choice is made, an unavoidable path inevitably forms from which there is no return.[32]

Organizations

Paul Pierson's influential attempt^[specify] to rigorously formalize path dependence within political science, draws partly on ideas from economics. Herman Schwartz has questioned those efforts, arguing that forces analogous to those identified in the economic literature are not pervasive in the political realm, where the strategic exercise of power gives rise to, and transforms, institutions.

Especially sociology and organizational theory, a distinct yet closely related concept to path dependence is the concept of imprinting which captures how initial environmental conditions leave a persistent mark (or imprint) on organizations and organizational collectives (such as industries and communities), thus continuing to shape organizational behaviours and outcomes in the long run, even as external environmental conditions change.^[33]

Individuals and groups

The path-dependence of emergent strategy has been observed in behavioral experiments with individuals and groups.^[34]

Other examples

• A general type of path dependence is a typological vestige.
  • In typography, for example, some customs persist, although the reason for their existence no longer applies; for example, the placement of the period inside a quotation in U.S. spelling. In metal type, pieces of terminal punctuation, such as the comma and period, are comparatively small and delicate (as they must be x-height for proper kerning.) Placing the full-height quotation mark on the outside protected the smaller cast metal sort from damage if the word needed to be moved around within or between lines. This would be done even if the period did not belong to the text being quoted.
• Evolution is considered by some to be path-dependent: mutations occurring in the past have had long-term effects on current life forms, some of which may no longer be adaptive to current conditions. For instance, there is a controversy about whether the panda's thumb is a leftover trait or not.
• In the
  embrace, extend and extinguish
  .
• In socioeconomic systems, commercial fisheries' harvest rates and conservation consequences are found to be path dependent as predicted by the interaction between slow institutional adaptation, fast ecological dynamics, and diminishing returns.^[35]
• In physics and mathematics, a
  non-holonomic system is a physical system in which the states depend on the physical paths taken.^[36]

• Critical juncture theory
• Imprinting (organizational theory)
• Innovation butterfly
• Historicism
• Network effect
• Opportunity cost
• Ratchet effect
• Tyranny of small decisions

Notes