Path Dependence

Path dependence is the dependence of economic outcomes on the sequence of previous outcomes, rather than simply on current intentional action and exogenous causal elements. For a path-dependent process, economic explanation requires attention to the interplay of forward-looking optimizing behavior with the legacy of historical choices, events, and conditions. Sources of path dependence may include technical interrelatedness, irreversible investments, coordination costs, and various sorts of increasing returns. Influential or disputed cases of path dependence include the QWERTY keyboard, various information technologies, and railway track gauges. Path-dependent outcomes may be inefficient by some criteria but not by others.