path dependence

Path dependence occurs when the state of an evolutionary process is dependent on the initial conditions at any time. In mathematical stochastics, this refers to the dependence of transition probabilities between different states in time on the initial state. These are non-ergodic processes. In economics, an important class of path-dependent processes result from the existence of multiple equilibria, especially in >frequency-dependent processes.

In EE, path dependence is one of the expressions of the complexity of >time as compared to standard economics. Hence it is often linked with the concept of history. Many path-dependent processes also show a failure of strong causality, meaning that different causes of similar magnitude lead to differences of results in the same scale. Path-dependent processes can have the property that very small variations of initial conditions (even unobservable ones) can lead to very different results. This is caused by an array of different mechanisms of self-reinforcement of certain actions, for instance because of positive externalities between actions following in a chain.

In the analysis of >institutions and >technology, path-dependency is regarded as one possible cause of "lock-in" in suboptimal states, for example, in the evolution of technological >standards. This means that depending on the initial state a technology might prevail that is not the preferred one form the perspective of a perfectly informed outside observer, and that the process cannot change the technology endogenously. Therefore, path-dependence is often adduced as an argument in favor of intervention into the market process. However, since the knowledge of the intervening actors is never perfect, this argument needs to be treated very cautiously.

Path dependence should not be confused with the interaction between process and changing exogenous conditions, which also leads to the formation of singular historical paths, yet without a determining force of the initial conditions.

Basic References

The topic of path-dependency is pursued with a vengeance in the economics of technological networks, where it is of high political visibility, see
Liebowitz' site
Tetsafion's site

A classic is:
W. Brian Arthur, Competing Technologies, Increasing Returns and Lock-in by Historical Events, in: Economic Journal, Vol. 99, S, 116-131, 1989.

Semantic Field
network   time
frequency dependency   path dependence   standard