Path dependence

Path dependence explains how the set of decisions one faces for any given circumstance is limited by the decisions one has made in the past or by the events that one has experienced, even though past circumstances may no longer be relevant. Path dependence explains how the set of decisions one faces for any given circumstance is limited by the decisions one has made in the past or by the events that one has experienced, even though past circumstances may no longer be relevant. In economics and the social sciences, path dependence can refer either to outcomes at a single moment in time, or to long-run equilibria of a process. In common usage, the phrase implies either: In the first usage, (A), 'history matters' is trivially true in many contexts; everything has causes, and sometimes different causes lead to different outcomes. In these contexts, the direct influence of earlier states may not be notable, unlike 'path-dependent' options in finance, where the influence of history can be non-standard.