Path Dependence and the Folly of Incrementalism

“History matters” (Robert Jensen)

I am currently teaching a seminar entitled “Rethinking Progress.” One recurring topic in our discussions is the modern world’s present rate of technological advance in the absence of commensurate progress in the social sphere. My students sense an ominous imbalance and probable environmental overshoot. I want them to see the folly of incrementalism as a solution, yet do not want them to see me as preaching revolution. I therefore believe an understanding of path dependence to be vital in helping them arrive at intelligent conclusions. 

Everyone knows that meaningful potential remedies such as the Green New Deal are non-starters in today’s polarized political climate. Yet at this stage, half-measures or policy moderation are destined to get us nowhere. How can understanding path dependence and the folly of incrementalism help us? To make progress – or, some would say, to survive – humanity will require far-reaching changes of enormous magnitude. Understanding the role of path dependence on history could help bring about favorable changes. 

I am not a historian. But I would submit that the quandary in which humanity finds itself is path dependent, and it is for this reason that solutions appear intractable.  Understanding how it works is crucial to understanding why the Green New Deal and other bold but necessary ideas seem unachievable today. We will require a fundamental rethinking of historical dynamics to counteract the curse of path dependence.

Path Dependence

Path dependence describes any situation in which some impractical, inefficient, or otherwise undesirable outcome emerges from earlier historical contingencies. Perhaps the most well-known example is the QWERTY keyboard. If you are not familiar with the name, it refers to the six letters on the upper left of any known keyboard configuration. Did you ever wonder why we do not organize the letters in alphabetical order or some alternative arrangement?

Legend has it that back in the day when we used typewriters, some – secretaries especially – typed so quickly that the bars to which each key was attached would invariably collide and jam. The solution at the time was to place the more common letters in harder to reach positions in order to slow typing down. We’re talking about the 1870s or 1880s.

So, there appears to have been a reason that today we arrange the keys as we do. Does it matter any longer? Of course not. Since all typing is done electronically, there is no issue of keys physically “jamming.” Yet QWERTY is still with us. We cannot know, never mind measure, the potential benefit of switching to a faster keyboard configuration. But – and here is the crux – we know that switching would be “inefficient” in the short term. The new hardware expense, steep learning curve, and other adjustment costs appear to be sufficient reasons for not switching to a faster mode of typing and are likely to remain so. 

There are countless other illustrations of path dependence, some quite amusing. Today, for example, we justify in different ways the necessity of having a kick plate on your front door. Home Depot or Lowe’s are ready to supply you if you happen to lack one. But according to legend, kick plates originate from our wish to keep spirits away from our homes. The brass of which they are typically made supposedly repel ghosts. Ok, the example might be apocryphal. But generally speaking, path dependence does make us blind to the history of why things are as they are. False explanations and justifications are always easy enough to manufacture. But they can be costly.

More Consequential Examples

There are many poorly conceived ideas or inventions to which we nevertheless rigidly adhere. Take automobiles. It is unlikely that the early developers of the internal combustion engine could have foreseen the inter-state highway system or suburban sprawl. Yet today we too infrequently stop and ask why neighborhoods, towns, and metropolitan statistical areas are designed the way they are. Granted, in many if not most instances, people are made worse off if they lost driving privileges. But does it mean that a car-dependent society is more advanced than a more “pedestrian” one? We certainly could make the case that a future with no cars would be better than one with them.

What about cellphones? I never took to them, always preferring to be incommunicado while out of doors. Cellphones have always had a way of making the most routine events into emergencies. But it eventually became too costly and impractical not to have one. So, I’ve packed a cellphone for the past three years and I imagine it unavoidable that I will eventually succumb to the temptation of a “smart” phone. Yet there is little doubt that modern society is worse off having relinquished its idle moments to these portable “phone-computers.” If you doubt it, you have not seen the documentary titled The Social Dilemma. Again, the cost of self-identifying as a refusenik probably exceeds the benefit. But what if we all just said no?

There are other more abstract, but possibly even more momentous examples. GDP, for instance. Despite its many and increasingly obvious flaws there is little sign that GDP’s policy influence is waning. Au contraire. Economic and policy leaders the world over appear “stuck” with GDP. And yes, path dependence got us here. Revisiting GDP’s origins sheds light on how.

It was in the early years of the Cold War that economist Simon Kuznets, in collaboration with others, set out to develop a system of national income accounting that was to make him famous (and ultimately earn him a Nobel Prize in 1971).[1] It is to this system that we credit GDP as well as its cousins, gross national product (GNP) and gross national income (GNI). Because the U.S. is a consumerist economy (and the U.S.S.R emphatically was not), national income accounting was a useful rhetorical device to advertise the former’s “superiority” to the latter.

But the Cold War has been over for three decades. So, how to explain our continued fascination with GDP and its annual growth rate? We justify it on grounds that, while not perfect, GDP offers a simple, “objective,” market-based means of evaluating social progress. But as I have commented elsewhere, such claims could never withstand serious scrutiny. Leading experts and lay people alike know that we’d all be better off jettisoning GDP. But the road to a functional alternative is murky, not to mention probably contentious and costly. So, the temptation to stick with the status quo is irresistible.

Yet such rigidity is positively pernicious. As Joseph Stiglitz astutely observed, “We value what we measure.” Here, GDP is exhibit A. Since national leaders believe that they are stuck with it, they promote values conducive to GDP growth – namely material consumption and financial speculation. Since, for example, the social and environmental consequences of “keeping up with the Jones’s” do not figure in the national income accounts, we can safely ignore them. And although a major reckoning is in the offing at some point, the beneficial effects to GDP of rapid asset price increases makes continued irrational exuberance irresistible. 

As with the car and the cellphone, GDP has compelled us to structure our society and institutions in ways that, in hindsight, appear seriously problematic if not unsustainable.

Problem-Solving and Complexity

In a way, path dependence relates to the work of archaeologist Joseph Tainter, on which I commented some time ago. He argues that human history is composed of an endless series of solutions to problems and challenges encountered over the long arc of time. Technological advance, to be sure, but also institutional development, administration, and bureaucracy. 

The problem that Tainter identifies is a form of “social myopia.” At nearly every step humans focus on the immediate challenge, either disregarding or failing to anticipate future consequences. In subsequent stages the process repeats, and we tend to get “locked in,” even in the face of growing evidence of inefficiency or maladaptability. Path dependence describes this exact phenomenon: A series of incremental choices that appear “optimal” at the time lead us to an ultimately unfavorable outcome from which it is difficult to extract ourselves.

My reading of Tainter is that as we advance socially, culturally, and economically, a growing supply of patches, band-aids, or duct tape is deployed to keep our increasingly complex system intact and running. Unfortunately, unplanned-for inconveniences gradually but cumulatively become assimilated into the system, rendering it progressively unstable.

For example, while phenomena like specialization and administration are advantageous to development and progress in the early stages, these ossify into the simple-mindedness and red tape that represent a net cost to society. In later stages, the flip side of specialization – insufficient supply of the generalists or systems thinkers needed to defuse our contemporary crises – rears its head. And I need not elaborate on the problems with bureaucracy and red tape, subjects on which an abundance has already been written.

It is continuation along this road to which Tainter attributes collapse of civilization. Yet, far from recognizing it at an institutional level, modern society appears to “double down.” We drag our feet at the imposition of carbon taxes; we continue to profligately use antibiotics despite known ecological consequences; we resist progressive taxation regardless of monstrous inequality; our central bank continues to socialize financial losses on Wall Street even with the impending wrath of middle America. These are just a few examples; yet all illustrate the curse of path dependence.

A Mathematical Illustration

Let’s again consider suburban sprawl, our GDP growth obsession, or even QWERTY. Recall that they are far from optimal yet seemingly “efficient”outcomes. In the language of mathematics, we can describe them all as local maxima (Diagram 1). 

While not the best possible situation, each local maximum dominates all alternatives in its “neighborhood.” Imagine being at the summit of a mountain, surrounded by higher peaks in the distance. Alas, any step in the direction of a higher peak necessarily takes us “downhill” to an inferior position. It would be akin to walking to work in the suburbs or trying a random arrangement of keys on a computer. In the neighborhood of this local maximum, ‘Z_LM’ is the highest degree of wellbeing that we can attain. (Diagram 2). 

In the real world, of course, there could be numerous competing local maxima, each presenting the same predicament (Diagram 3). 

And here is the rub. Because the best alternative – the global maximum (Diagram 4) in the language of math or, for our purposes, green public transit or the ostensibly more efficient Dvorak keyboard – is so “far off,” all steps in the right direction appear to be bad ideas. It is why, in cases when meaningful change is imperative, incrementalism tends only to reinforce the status quo. Even though often well intentioned, it can be dangerously counter-productive.

There is a well-known analogy in evolutionary biology. The late Steven Jay Gould achieved renown with his theory of punctuated equilibrium. According to Gould the fossil record reveals long and regular periods of relative biological statis or equilibrium – i.e., absence of evolution. He conjectured that only occasionally do major random events – certain asteroid collisions, for example – disrupt biological equilibria.

The implication is that, far from being a linear, progressive phenomenon, evolution proceeds in fits and starts. We can depict each existing species with a stable “local” maximum. Random events are undoubtedly disruptive and wipe out many species, which we could represent as troughs or “local minima” in our diagrams. But occasionally a species might end up on another “hill,” ascending to a higher local maximum. Or possibly even approaching the global maximum (‘Z_GM’ on Diagram 5).

How does it all relate to path dependence and Tainter’s work on civilization collapse? Path dependence describes the process of getting us to a local maximum. But it tells us nothing about how to move to a higher point. On the contrary, it explains why it is so fiendishly difficult to do so. The local stability of a given peak militates against incremental progress away from it. 

The implications of accepting Tainter’s framework[2] as a means of explaining the present and predicting the future are gloomy. The inferiority of the status quo would grow increasingly apparent over time, yet it would also become more solidified. The more time were to elapse, the larger the “leap” that would be required to put humanity on a more favorable course (Diagram 6).

There is always risk, of course, in oversimplifying things. But I think the above more or less captures the present human situation. And if there is reason for optimism, it is in the hope that it is still “soon.”

Economic Implications

Major economic changes in the near future are not only necessary; they are unavoidable. Whether it means socialist revolution, plutocratic totalitarianism, or something else will need to be the topic of a future post. But we should at the very least reevaluate the mainstream economics approach to contemporary problems.

Economists mostly ignore path dependency. Persistent focus on “efficiency” causes us to miss the forest for the trees. Unlike great classical thinkers like Smith, Ricardo, Mill, and Marx, we are no longer even interested in the forest. Since the advent of neoclassical economics, a century and a half ago, economists have increasingly focused on incremental or “marginal” deviations from an “efficient” solution. Efficiency stands for a local maximum.

I am under no illusion that a return to “big picture” thinking in economics is imminent. There is enormous pressure within the academy to resist it. Broad economic perspectives tilt against disciplinary specialization and are hostile to economists’ scientific pretenses. And let’s not even get into the political constraints to revising a theoretical edifice that celebrates capitalism.

And yet. If you’ve been reading my blog, you probably also get the sense that humankind is at some sort of historical crossroads. Economists in the academy are unlikely to be spared, regardless of the choices we make. In a way, our woeful mishandling of the pandemic only underscores the major shocks that now seem unavoidable. The fundamental question is whether they point in the direction of a global maximum or, alternatively, some “minimum.”

What is so interesting about the present is that we appear, more than ever, to be teetering on the knife edge between a revolutionary breakthrough and systemic collapse. Back in 2008, British scientist James Lovelock said that “if we’re lucky” it would be 20 years before it all hit the fan. I understand why many consider him an oracle. Still, call me a Romantic but I yet think it could go either way.

[1]To his credit, he always expressed great doubt about GDP as an indicator of progress. But his warning mostly fell upon deaf ears.

[2]Tainter is himself explicit that his theory of societal collapse need not hold implications for the present.