The Research Of Path Dependence In Institutional Change

Path dependence is a noun used in western institutional economics. Path dependence refers to one system with positive feedback, and if an external &occasional event is adopted, this system will evolution following with certain path. What is more, on this condition, this system is difficult to be replaced by other ones, even if they are better than it.Path dependence is earliest used to describe biology evolution path by biologist.Later,it is used to describe self-accumulation and sefl-strengthening in technological change. Douglass North developed this theory into institutional change which also has the attribute of positive feedback. Path dependence is used by him to describe this fact: former results affect those of today and even later. He pointed out, once one country adopts one institution to develop its economy, the fixed direction will be strengthened after then. The scale profit brought by institution decides the direction of institutional change, and showed two possible opposite locus. Once profit increase is common, institutional change will be steady and be strengthened,otherwise,the institution will develop towards non-profit and even will be locked-in inefficient.The background reason of path dependence is profit factors in fact. Path dependence in institutional change doesn't mean "history determine". In this article, I explained this point through two examples, one is China's gradual reform and open policy, the other is the reform of SOE(State-Owned Enterprise).Some policy suggestion is given about how to go out from lock-in during the reform of SOE.