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CandleFocus Glossary Editor
Path dependency is an economic concept that explains how historical events can have a lasting effect. The idea is that, even if the present situation is no longer the best alternative, it is still the most likely outcome due to the inertia of sticking to the established system. This can even occur when newer, better alternatives exist.
The phrase “path dependency” was first coined by economist Paul David in 1985. David used the concept to explain the persistent problem of introducing better or more advanced technologies or systems into existing practices which are resistant to change. He argued that once certain decisions were made, it was too difficult and costly to undo them, so the same old technology or standards were kept in place, often for decades.
In an economic context, path dependency can be observed in the way an industry takes shape. When an industry is first created, it often adopts certain technologies, standards, and practices which become “locked in”. Companies that enter the industry later on would not benefit from a new, better system as they would have to break away from the existing practices. This example can also explain why some companies are so successful, even if their technology is not the best on the market.
Path dependency is also broadly visible in politics and public policy. Changes in policy often occur at a glacial pace due to the inertia of the existing system. Decision-makers can be wary of proposing changes which are perceived as too radical, and might be unwilling to gamble on a new system that could fail.
The concept of path dependency has deep roots in sociology and psychology as well. Habits are notoriously difficult to break and most people cling to familiar existing patterns and resist change, even when a better alternative exists.
In summary, path dependency is a powerful concept that explains why it is so difficult to introduce new technologies and practices into existing systems. Even when better alternatives exist, the inertia of the existing system and the reluctance to pursue radical changes often restrict any path dependency.
The phrase “path dependency” was first coined by economist Paul David in 1985. David used the concept to explain the persistent problem of introducing better or more advanced technologies or systems into existing practices which are resistant to change. He argued that once certain decisions were made, it was too difficult and costly to undo them, so the same old technology or standards were kept in place, often for decades.
In an economic context, path dependency can be observed in the way an industry takes shape. When an industry is first created, it often adopts certain technologies, standards, and practices which become “locked in”. Companies that enter the industry later on would not benefit from a new, better system as they would have to break away from the existing practices. This example can also explain why some companies are so successful, even if their technology is not the best on the market.
Path dependency is also broadly visible in politics and public policy. Changes in policy often occur at a glacial pace due to the inertia of the existing system. Decision-makers can be wary of proposing changes which are perceived as too radical, and might be unwilling to gamble on a new system that could fail.
The concept of path dependency has deep roots in sociology and psychology as well. Habits are notoriously difficult to break and most people cling to familiar existing patterns and resist change, even when a better alternative exists.
In summary, path dependency is a powerful concept that explains why it is so difficult to introduce new technologies and practices into existing systems. Even when better alternatives exist, the inertia of the existing system and the reluctance to pursue radical changes often restrict any path dependency.