9 Path dependency
Mark Setterfield
Path dependency: a general definition
A dynamical system displays path dependency if earlier states of the system affect later ones, including (but not limited to) anything that can be construed as a ‘long run’ or ‘final’ outcome of the system. As this definition makes clear, the essence of a path-dependent system is that ‘history matters’: outcomes – whether shorter term or longer lasting – are historically contingent. The obvious contrast is with an ordinary first-order autoregressive (AR1) process, in which history will appear to influence outcomes over some interval of time, only for this influence to disappear as the system eventually settles into a terminal outcome that ...
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