PATH DEPENDENCE AND THE QUEST FOR HISTORICAL ECONOMICS: ONE MORE CHORUS OF THE BALLAD OF QWERTY

 

Paul A. David

 

All Souls College, Oxford and Stanford University

 

Abstract

The term path dependence (PD) here refers to a dynamic property of allocative processes, pertaining to non-ergodic stochastic systems -- those whose asymptotic distributions evolve as a function of the history of the process itself. PD is shown to be neither necessary nor sufficient for the existence of 'market failure', although the two properties may arise from common structural features. A variety of stochastic models are PD and yet exhibit diverse properties in regard to predictability and 'lock-in'. The taxonomy of path dependence propsed by S. J. Liebowitz and S. E. Margolis (1995), along with the latter's interpretation of 'lock-in' and 'accidents of history' are shown at best to be of limited usefulness in the study historical phenomena, and misleading as to the possible implications of PF for economic policy analysis.