Path dependence

Path dependence in economics is the phenomenon whereby an economic outcome is the result of a historical path or series of accidents rather than current market conditions. In processes which result in such outcomes it is commonly said that "history matters". The idea of path dependence was put forth by economists Brian Arthur and Paul David and is based on an analogy used to characterize systems in biology and physics which have strong sensitivity to initial conditions and are thus said to be path dependent. Economic outcomes which are path dependent are sometimes believed to potentially result in a market failure if for example they lead to a related phenomenon known as technological lock-in, whereby a possibly inferior standard is chosen as a result of its path dependence.