Path Dependence: Segregation, Increasing Returns, and Success to the Successful

Thomas Schelling’sSchelling, T. Micromotives and Macrobehavior created a new field dealing with the phenomenon of emergenceEmergence in social systemsSocial system. As described in Chap. 3 , emergence occurs when a systemSystem is observed to have properties its elements do not have on their own, properties or behaviors that emerge only when the elements interact in a wider whole. Schelling showed that segregationSegregation between people of different ethnicity occurs not because they want to be fully segregated from each other but because even an ever so slight preferencePreference for having neighbors of same ethnicity eventually leads to segregation. Thus segregationSegregation is an emergent phenomenon. A similar dynamicsDynamics happens when increasing returns to adoptionIncreasing returns to adoption of a new product is at play because even slight advantages of one product result in a market share close to a monopoly that is way beyond the preferencesPreference of buyersBuyers. A generic version of Brian Arthur’s increasing returns dynamicsDynamics is Peter Senge’sSenge, P. Success to the Successful. All three have in common that their dynamics never reaches a stable equilibriumStable equilibrium. Another commonality is a path’s sensitive dependenceSensitive dependence on initial conditions—the butterfly effectButterfly effect in action.