Path dependence
Topic: Schools of Economic Thought and Economic Laws · NCERT: Beyond NCERT
Meaning
Path dependence means past choices limit present options. A historical accident or early decision can lock in an outcome, even when a better alternative exists later. Switching becomes costly because people, firms and rules have already adjusted to the old path. The idea helps explain why institutions and gaps between regions last so long.
Example
The QWERTY keyboard layout is the classic example. It still dominates because everyone learned it, not because it is the best design. In India, districts that had landlord-based (zamindari) land-revenue systems under colonial rule still show lower agricultural investment and productivity than raiyatwari areas (Banerjee-Iyer).
Related concepts
- Institutional economics
- New institutional economics
- Creative destruction
- Development economics
- Structuralism (development economics)
- Dependency theory
- Developmental state