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Path dependence, its critics and the quest for ‘historical economics’

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Author Info
Paul A.David (All Souls College, Oxford & Stanford University)

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Abstract

The concept of path dependence refers to a property of contingent, non- reversible dynamical processes, including a wide array of biological and social processes that can properly be described as 'evolutionary.' To dispell existing confusions in the literature, and clarify the meaning and significance of path dependence for economists, the paper formulates definitions that relate the phenomenon to the property of non-ergodicity in stochastic processes; it examines the nature of the relationship between between path dependence and 'market failure,' and discusses the meaning of 'lock-in.' Unlike tests for the presence of non-ergodicity, assessments of the economic significance of path dependence are shown to involve difficult issues of counterfactual specification, and the welfare evaluation of alternative dynamic paths rather than terminal states. The policy implications of the existence of path dependence are shown to be more subtle and, as a rule, quite different from those which have been presumed by critics of the concept. A concluding section applies the notion of 'lock-in' reflexively to the evolution of economic analysis, suggesting that resistence to historical economics is a manifestation of 'sunk cost hysteresis' in the sphere of human cognitive development.

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Paper provided by EconWPA in its series Economic History with number 0502003.

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Length: 25 pages
Date of creation: 10 Feb 2005
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Handle: RePEc:wpa:wuwpeh:0502003

Note: Type of Document - pdf; pages: 25
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Related research
Keywords: path dependence; non-ergodicity; irreversibility; lock-in; counterfactual analysis;

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N - Economic History

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References listed on IDEAS
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  1. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May. [Downloadable!] (restricted)
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Cited by:
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  1. Donald R. Davis & David E. Weinstein, 2002. "Bones, bombs and break points: The geography of economic activity," Discussion Papers 0102-02, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  2. E. Fabio Arcangeli & Giorgio Padrin, 2004. "Endogenous space in the Net era," ERSA conference papers ersa04p438, European Regional Science Association. [Downloadable!]
  3. Donald R. Davis & David E. Weinstein, 2004. "A Search for Multiple Equilibria in Urban Industrial Structure," NBER Working Papers 10252, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Bertocco Giancarlo, 2006. "Finance and Development: is Schumpeter’s Analysis still relevant?," Economics and Quantitative Methods qf06011, Department of Economics, University of Insubria. [Downloadable!]
    Other versions:
  5. Eric Crampton & Donald Boudreaux, 2004. "Does Cyberspace Need Antitrust?," Industrial Organization 0401001, EconWPA. [Downloadable!]
  6. Paul A. David, 2001. "The Beginnings and Prospective Ending of “End-to-End”," Working Papers 01012, Stanford University, Department of Economics. [Downloadable!]
  7. Daniela Grieco, 2006. "Degree of innovativeness and market structure: A model," CESPRI Working Papers 178, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised May 2006. [Downloadable!]
  8. Carolina Castaldi & Giovanni Dosi, 2003. "The Grip of History and the Scope for Novelty: Some Results and Open Questions on Path Dependence in Economic Processes," LEM Papers Series 2003/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  9. Alice Nicole Sindzingre, 2007. "Poverty traps: a perspective from development economics," EconomiX Working Papers 2007-26, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  10. Ramlogan, Ronnie & Consoli, Davide, 2008. "Knowledge, understanding and the dynamics of medical innovation," MPRA Paper 9112, University Library of Munich, Germany. [Downloadable!]
  11. Paul A. David & Francesco Rullani, 2006. "Micro-dynamics of Free and Open Source Software Development. Lurking, laboring and launching new projects on SourceForge," LEM Papers Series 2006/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
  12. Patrucco Pier Paolo, 2002. "The emergence of technology systems: Knowledge production and distribution in the case of the Emilian plastics district," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200206, University of Turin. [Downloadable!]
    Other versions:
  13. Consoli Davide & Quatraro Francesco & Patrucco Pier Paolo, 2006. "Un'analisi comparata delle performance technologiche nel nord-ovest sabaudo nel lungo periodo nel contesto delle regioni italiane: gli anni 1980-2001," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200605, University of Turin. [Downloadable!]
  14. Paul A. David, 2005. "The Beginnings and Prospective Ending of “End-to-End”: An Evolutionary Perspective On the Internet’s Architecture," Industrial Organization 0502012, EconWPA. [Downloadable!]
  15. repec:att:wimass:192032 is not listed on IDEAS
  16. Ilan Noy & Joshua Aizenman, 2007. "Prizes for Basic Research -- Human Capital, Economic Might and the Shadow of History," Working Papers 200705, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
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  17. Jean-Michel Dalle & Paul David, 2005. "The Allocation of Software Development Resources In ‘Open Source’ Production Mode," Industrial Organization 0502011, EconWPA. [Downloadable!]
  18. J. Mokyr, 2004. "Useful Knowledge as an Evolving System: the view from Economic History," Papers on Economics and Evolution 2004-23, Max Planck Institute of Economics, Evolutionary Economics Group.
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