A Rational Risk Policy? Why Path Dependence Matters.

The Kelly criterion determines optimal bet sizes that maximize long-term growth. While growth is definitely an important consideration, the focus on growth alone can lead to significant drawdowns, leading to psychological discomfort for a risk-taker. Path-dependent risk measures, such as drawdown risk, provide a means to assess the risk of significant portfolio retracements. In this paper, we provide a flexible framework for assessing path dependent risk for a trading or investment operation. Given a certain set of profitable trading characteristics, a risk-taker who maximizes expected growth can still be faced with significant drawdowns to the point where a strategy becomes unsustainable. We demonstrate, through a series of experiments, the importance of path dependent risks in the case of outcomes subject to various return distributions. Based on Monte Carlo simulation, we analyze the medium-term behavior of different cumulative return paths and study the impact of different return outcome distributions. We show that in the case of heavier tailed outcomes, extra care is needed, and optimal might not be so optimal in the end.

Path-dependent institutions drive alternative stable states in conservation.

Understanding why some renewable resources are overharvested while others are conserved remains an important challenge. Most explanations focus on institutional or ecological differences among resources. Here, we provide theoretical and empirical evidence that conservation and overharvest can be alternative stable states within the same exclusive-resource management system because of path-dependent processes, including slow institutional adaptation. Surprisingly, this theory predicts that the alternative states of strong conservation or overharvest are most likely for resources that were previously thought to be easily conserved under optimal management or even open access. Quantitative analyses of harvest rates from 217 intensely managed fisheries supports the predictions. Fisheries' harvest rates also showed transient dynamics characteristic of path dependence, as well as convergence to the alternative stable state after unexpected transitions. This statistical evidence for path dependence differs from previous empirical support that was based largely on case studies, experiments, and distributional analyses. Alternative stable states in conservation appear likely outcomes for many cooperatively managed renewable resources, which implies that achieving conservation outcomes hinges on harnessing existing policy tools to navigate transitions.

Whirlwind model of entrepreneurial ecosystem path dependence.

The body of literature on entrepreneurial ecosystems (EEs) is rapidly expanding, but few studies have simultaneously examined their complexity, dynamics, and context. To better understand how they evolve, we introduce the notion of EE path dependence based on an original combination of an evolutionary approach and complex adaptive system theory. We thus present a whirlwind model that takes the form of subecosystems and that integrates a structural approach with attributes and a dynamic approach with sequences. Context is addressed through narratives and entrepreneurial stories. We conducted a case study on the EE of Montpellier, France. To characterize the subecosystems, we quantified the attributes using NVivo software, showing their links and evolution over time. The results shed light on the subecosystems that contributed the most to the entrepreneurial dynamics. This study contributes to extending path dependence theory to EEs. The results may help policymakers rethink their development strategies by setting priorities in accordance with the drivers of their EEs. Supplementary Information: The online version contains supplementary material available at 10.1007/s11187-021-00553-x.

Contingentism for historians.

In this paper, I will propose a formulation of the contingentism/inevitabilism (C/I) debate that does not require of alternatives to present-day scientific theories that they are equally successful, but rather asks whether they are historically possible. I argue that the debate has already, over the past decades, moved towards a more historical interpretation of the issue, and that it is worth exploring what it would entail to let go of normative considerations altogether. Different answers to inevitability questions still retain the philosophical relevance that originally led Ian Hacking to explore philosophical disagreement in terms of the contingentism/inevitabilism debate.1.

Re-opening after the lockdown: Long-run aggregate and distributional consequences of COVID-19.

Covid-19 has dealt a devastating blow to productivity and economic growth. We employ a general equilibrium framework with heterogeneous agents to identify the tradeoffs involved in restoring the economy to its pre-Covid-19 state. Several tradeoffs, both over time, and between key economic variables, are identified, with the feasible speed of successful re-opening being constrained by the transmission of the infection. In particular, while more rapid opening up of the economy will reduce short-run aggregate output losses, it will cause larger long-run output losses, which potentially may be quite substantial if the opening is overly rapid and the virus is not eradicated. More rapid opening of the economy mitigates the increases in both long-run wealth and income inequality, thus highlighting a direct conflict between the adverse effects on aggregate output and its distributional consequences.

Mega-disruptions and policy change: Lessons from the mobility sector in response to the Covid-19 pandemic in the UK.

There has been widespread interest in the potential for the significant behavioural and policy adaptations rendered necessary by Coronavirus to act as a catalyst for radical longer term policy change in transport. However, this body of work to date has been limited in its consideration of how such policy change might be brought about. Translating the lessons from the Coronavirus response to other ongoing strategic challenges such as decarbonisation requires analysis of what the pandemic has revealed about processes of policy formulation and how institutions responsible for policy implementation actually work. This paper explores the extent to which rapid policy change has actually been possible in the transport sector in England and Scotland during the pandemic, and key examples of how such change has been both achieved and blocked. Two rounds of interviews with senior stakeholders from across the transport sector were undertaken in June and November 2020 to inform the analysis. We find that the pandemic has accelerated some policy commitments that were already planned, but at a time of huge stress on the whole of government and its partner delivery organisations, the potential to deliver radical policy adaptation was limited. However, Coronavirus is recognised as being a potentially path-changing disruption to existing trajectories in terms of the adaptations to business practices, industry structures, ways of working and the public finances. Paradoxically, whilst recognising these uncertainties, decision-makers are yet to deviate from pre-pandemic planning assumptions and policy plans and this risks missing the opportunities to steer how those changes unfold.

The tragedy of the canon; or, path dependence in the history and philosophy of science.

We have previously argued that historical cases must be rendered canonical before they can plausibly serve as evidence for philosophical claims, where canonicity is established through a process of negotiation among historians and philosophers of science (Bolinska and Martin, 2020). Here, we extend this proposal by exploring how that negotiation might take place in practice. The working stock of historical examples that philosophers tend to employ has long been established informally, and, as a result, somewhat haphazardly. The composition of the historical canon of philosophy of science is therefore path dependent, and cases often become stock examples for reasons tangential to their appropriateness for the purposes at hand. We show how the lack of rigor around the canonization of case studies has muddied the waters in selected philosophical debates. This, in turn, lays the groundwork for proposing ways in which they can be improved.

Traps and transformations influencing the financial viability of tourism on private-land conservation areas.

The ability of private conservation organizations to remain financially viable is a key factor influencing their effectiveness. One-third of financially motivated private-land conservation areas (PLCAs) surveyed in South Africa are unprofitable, raising questions about landowners' abilities to effectively adapt their business models to the socioeconomic environment. In any complex system, options for later adaptation can be constrained by starting conditions (path dependence). We tested 3 hypothesized drivers of path dependence in PLCA ecotourism and hunting business models: (H1) the initial size of a PLCA limits the number of mammalian game and thereby predators that can be sustained; (H2) initial investments in infrastructure limit the ability to introduce predators; and (H3) rainfall limits game and predator abundance. We further assessed how managing for financial stability (optimized game stocking) or ecological sustainability (allowing game to fluctuate with environmental conditions) influenced the ability to overcome path dependence. A mechanistic PLCA model based on simple ecological and financial rules was run for different initial conditions and management strategies, simulating landowner options for adapting their business model annually. Despite attempts by simulated landowners to increase profits, adopted business models after 13 years were differentiated by initial land and infrastructural assets, supporting H1 and H2. A conservation organization's initial assets can cause it to become locked into a financially vulnerable business model. In our 50-year simulation, path dependence was overcome by fewer of the landowners who facilitated natural ecological variability than those who maintained constant hunting rates and predator numbers, but the latter experienced unsustainably high game densities in low rainfall years. Management for natural variability supported long-term ecological sustainability but not shorter term socioeconomic sustainability for PLCAs. Our findings highlight trade-offs between ecological and economic sustainability and suggest a role for governmental support of the private conservation industry.

Understanding scaling through history-dependent processes with collapsing sample space.

History-dependent processes are ubiquitous in natural and social systems. Many such stochastic processes, especially those that are associated with complex systems, become more constrained as they unfold, meaning that their sample space, or their set of possible outcomes, reduces as they age. We demonstrate that these sample-space-reducing (SSR) processes necessarily lead to Zipf's law in the rank distributions of their outcomes. We show that by adding noise to SSR processes the corresponding rank distributions remain exact power laws, p(x) ~ x(-λ), where the exponent directly corresponds to the mixing ratio of the SSR process and noise. This allows us to give a precise meaning to the scaling exponent in terms of the degree to which a given process reduces its sample space as it unfolds. Noisy SSR processes further allow us to explain a wide range of scaling exponents in frequency distributions ranging from α = 2 to ∞. We discuss several applications showing how SSR processes can be used to understand Zipf's law in word frequencies, and how they are related to diffusion processes in directed networks, or aging processes such as in fragmentation processes. SSR processes provide a new alternative to understand the origin of scaling in complex systems without the recourse to multiplicative, preferential, or self-organized critical processes.

The lock-in effect and the greening of automotive cooling systems in the European Union.

As of 2017, the sale and use of the refrigerants most commonly used in automotive cooling systems - hydrofluorocarbons - are entirely banned in all new vehicles placed on the market in the European Union. These refrigerants have been recognised as potent greenhouse gases and, therefore, direct contributors to climate change. It is within this regulation-driven market that the technologies for a sustainable solution have been developed. However, this paper argues that the market for automotive cooling systems has been 'locked-in', which means that competing technologies, operating under dynamic increasing returns, will allow for one - potentially inferior technology - to dominate the market. Whilst such a situation is not uncommon, this paper discusses the way that regulation has reinforced a patented monopoly in 'picking winners': to the advantage of a synthetic chemical, R-1234yf, as opposed to the natural solution, which is CO2. By developing a generic conceptual framework of path dependence and lock-in, the presented evidence seeks to show how a snowballing effect has led to the intensification of differences in market share. We also argue that the automotive industry is potentially promoting short-term fixes, rather than long-term, sustainable and economically viable solutions.

Medicaid Expansion: A Tale of Two Governors.

This is a study of why two seemingly similar governors made divergent decisions on expanding Medicaid under the Patient Protection and Affordable Care Act (ACA). Performing a case study of Governors John Kasich (OH) and Scott Walker (WI), I explore the roles played by electoral pressures, political party, governor's ideology, the state's policy heritage, stakeholder advocacy, and the economy in each governor's decision about whether to expand Medicaid. Electoral pressure was the most significant factor for both governors. I demonstrate that even Walker succumbed to state electoral pressures and expanded Medicaid, albeit in a manner unique to Wisconsin. He did this despite his emphatic national rhetoric rejecting Obamacare and expansion. Additionally, existing state political institutions drove each governor to decide in a manner unique to his state: previous Medicaid decisions in Wisconsin and direct democracy in Ohio provided additional pressures and divergent starting points. The remaining factors served less as a driving force behind the decision and more as a frame to justify the decision ex post facto. Case studies allow for a more complex view of how political pressures fit together; differences can be explained and expanded, and an enhanced understanding of political processes can be gleaned.

Path creation as a discursive process: A study of discussion starters in the field of solar fuels.

When a technology is seen as the right solution to a recognized problem, the development of alternative technologies comes under threat. To secure much-needed resources, proponents of alternative technologies must, in these conditions, restart societal discussion on the status quo, a process at once technological and discursive known as 'path creation'. In this article, we investigate discussion-restarting strategies employed by supporters of emerging technologies in the field of solar fuels, particularly the advocates of a technology referred to as 'artificial photosynthesis'. For illustrative purposes we explore four such strategies: revisiting weak spots, resizing the problem, redefining the game, and renegotiating labels. We conclude with a methodological reflection on the empirical study of discursive strategies in a socio-technical system. We further suggest a more systematic application of discourse-analytical and argumentation-theoretical insights that can complement current scholarship on path dependence and path creation.

Coming to Terms with the Legacies of the Pound Model in Animal Sheltering in the United States.

This paper examines the legacies of the emergence of the animal control and sheltering industry in the United States and their impact on contemporary public animal shelters. While decades of gradual reform have helped substantially reduce the number of animals entering shelters and being killed there, contemporary animal sheltering largely continues to follow the path set when animal sheltering developed in the late 1800s and early 1900s. Three key interrelated legacies of the pound model of early animal control and sheltering enduringly shape sheltering today: (1) the institutional culture of animal shelters grounded in the logics of caging and killing; (2) the lack of visibility and transparency, especially within government shelters; and (3) the economic logics of the pound model, including the disparities in sheltering resources across communities. Examining the origins of animal control and sheltering and identifying the specific legacies of this pound model within contemporary government-funded shelters improves understanding of why such shelters in the US have developed with a particular set of practices and ideologies, and thus provides an important footing for envisioning and enacting radical changes in animal sheltering.

Spatiotemporal reconstruction of ancient road networks through sequential cost-benefit analysis.

The construction of ancient road networks spanned generations and exhibits temporal path dependence that is not fully captured by established network formation models that are used to support archaeological reasoning. We introduce an evolutionary model that captures explicitly the sequential nature of road network formation: A central feature is that connections are added successively and according to an optimal cost-benefit trade-off with respect to existing connections. In this model, the network topology emerges rapidly from early decisions, a trait that makes it possible to identify plausible road construction orders in practice. Based on this observation we develop a method to compress the search space of path-dependent optimization problems. We use this method to show that the model's assumptions on ancient decision-making allow the reconstruction of partially known road networks from the Roman era in good detail and from sparse archaeological evidence. In particular, we identify missing links in the major road network of ancient Sardinia that are in good agreement with expert predictions.

Challenges in Assessment of Health Systems Decentralization: The Role of Path Dependence and Choice of Indicators Comment on "The Effects of Health Sector Fiscal Decentralisation on Availability, Accessibility, and Utilisation of Healthcare Services: A Panel Data Analysis".

Optimal resource allocation within national health systems represents the ultimate challenge in diverse countries worldwide. Major part of the literature points that health systems decentralization potentially address the challenge. The present commentary focuses on the debate referring to effects of health systems decentralization, based on the evidence of the study of Arianna Rotulo and colleagues. Studies on the subject emphasize the role of path dependence and the influence of choice of indicators for measurement of effects in the assessment of health systems decentralization. Acknowledging the complexity of the phenomena, the results of the study of Rotulo et al on health system decentralization in Italy are highlighted through the analysis of recent evidence from the literature. The present commentary shows that there are diverse indicators adopted in the literature on the subject, pointing to mixed results, depending on country characteristics and selection of indicators in the analysis. The synthesis of indicators gathered in recent studies also indicate that health system indicators are sensitive to path dependence, thus, requiring additional attention to assumptions of studies on health systems decentralization. Thus, studies should consider the influence of path dependence on organizational practices and institutional structures involved in decentralization processes, in addition to acknowledging that assessments on decentralization vary substantially according to indicators adopted in the analysis, and their links with previous decisions within health systems.

Aging, crops and pesticide input: empirical evidence from rural China.

BACKGROUND: Although scholars have elaborated on the effects of aging, there is no consensus on the relationship between the aging and farmers' pesticide input. Regional differences in agricultural crops in China, namely 'Southern Rice and Northern Wheat', have not been considered in any of the existing studies. RESULTS: Based on the data of 443 wheat farmers and 324 rice farmers in China, this study found that aging significantly increased pesticide input. After sorting out the types of pesticides, it was found that the aging significantly increased the input of biological pesticides, but did not affect the input of chemical pesticides. After considering the planting pattern of 'Southern Rice and Northern Wheat', aging did not have a significant impact on the pesticide input of wheat farmers, but had a significant positive impact on the pesticide input of rice farmers. For wheat farmers in the north, social services have a significant inhibitory effect on the relationship between aging and pesticide input. For rice farmers, path dependence has a significant role in promoting the relationship between aging and pesticide input. CONCLUSION: The planting pattern of 'Southern Rice and Northern Wheat' will indeed affect the relationship between aging and pesticide input, and social services and path dependence are the main reasons for this heterogeneity effect. Therefore, improving agricultural socialization services and reducing farmers' dependence on traditional production experience will be an important way to effectively reduce the impact of aging. © 2023 Society of Chemical Industry.

Planning for social distancing: How the legacy of historical epidemics shaped COVID-19's spread in Madrid.

This paper combines historical and contemporary sources to examine 'epidemic urban planning' from the first decades of the 20th century through to the present day. It considers how infamous early 20th-century epidemics triggered the development of several urban regulations that profoundly shaped the city's future. To reduce the risk of contagion in bourgeois space, the city began displacing and spatially segregating the urban poor, leading to deprived neighbourhoods in the city's suburbs. The social and urban structure of these deprived, 'vulnerable' neighbourhoods remains to this day. Madrid was also greatly impacted by the COVID-19 crisis, and the initial distribution of COVID geographies seemed to reflect these historical legacies. Epidemic-influenced segregation kept wealthy neighbourhoods relatively safe during the first waves of the COVID-19 pandemic, concentrating the disease in poorer areas.

The pox of politics: Troesken's tradeoff reexamined.

In The Pox of Liberty, Werner Troesken details the tradeoff between liberal institutions and communicable disease. According to Troesken, individual freedom presents a danger to the public health in the face of infectious disease, while constitutional constraints restrict the government's ability to implement effective policy. Contra Troesken, I argue that decision-makers, amidst a crisis of contagion, neglect intertemporal tradeoffs, thereby discounting long run costs while favoring short run policies. These policies, once implemented, are difficult to reverse due to the path dependent nature of political institutions. Irreversible and self-reinforcing growth in political institutions established to enhance health can have an unintended negative impact on health during future crises, where political agents must operate in a more cumbersome and error-prone institutional environment. Using events from the history of public health in the U.S. as support for my theory, I conclude that Troesken's alleged tradeoff ought to be met with greater skepticism.

Large-Scale EHR Suites and Path-Dependence.

Large-scale electronic health record (EHR) suites are expected to cover a broad range of use scenarios for healthcare workers in hospitals, nursing homes, home-care services, and general practitioner (GP) clinics. However, preparation for the implementation of EHR suites requires years of detailed planning and consumes considerable financial and human resources. A key problem, then, is that there is less room for decision-makers to consider promising alternative solutions both before and after the implementation of EHR suites. On this basis, we explore how past decisions on EHR suites limit future technological alternatives. Empirically, we focus on the Health Platform program in Central Norway, where the goal is to implement the U.S. Epic EHR suite in 2022, following similar implementations in Denmark in 2016 and Finland in 2018.

Universal healthcare does not look the same everywhere: Divergent experiences with the private sector in Brazil and Thailand.

How does the private sector structure the trajectory of a country's universal healthcare programme? Social scientists have long pointed to the importance of path dependence in shaping health reform. Yet, rarely have middle-income countries' experience with the private sector under Universal Health Coverage (UHC) been examined from comparative perspective. In this paper, we explore the changing landscape of the health sector in Brazil and Thailand before UHC reform and after. We find path-dependent processes at work that have pushed two countries that both adopted UHC reforms in divergent directions. In Brazil, a comparatively large and entrenched private sector that existed before reform has grown over time, and a sizable private health insurance industry has exerted powerful influence on health policy, weakening the public sector. In Thailand, constraints on private health insurance growth and sustained investment in public health infrastructure and governance have helped check the growth of private sector influence, although battles over health policy still remain contentious. The experiences of these countries offer lessons for policymakers seeking to achieve and maintain robust UHC programmes in other contexts.