The paper "Australian Economy and Society" is a wonderful example of an assignment on macro and microeconomics. Many economic institutions in Australia apply the theory of path dependency in their decision-making process. This paper analyzes two institutions that apply this theory in details and how it affects such organizations. One of the organizations is the Water Market Efficiency in Victoria. Water governance in this country has gone through several changes all in a bid to improve on service delivery (Lubjuhn 2010). In the past, this organization relied so much on the help of the government in providing such services and clean water for residents in Victoria.
The pricing and allocation of irrigation water in the country depended on the markets and the government of Australia. Changes in such organizations impact on path dependency from frameworks in the history of the organization. This institution has had several changes for the last thirty years, which have made it a better organization than it was some three decades ago. The path dependency theory has both negative and positive effects on this particular economic institution in Australia.
This theory affects the organization in a positive way because it attributes the change to the path dependency theory. Previous frameworks of the organization set the path that it uses in making decisions and making certain changes. The path dependency provides a basis and path that an organization can use in the future. This means that the organization makes future decisions with guidance from such frameworks in the past. The Water Market Efficiency in Victoria institution used the path dependency theory to make effective decisions that contributed to the change (Lubjuhn 2010).
Experts explain that decision-makers in the institution based the theory to help them correct mistakes made in the past. The theory also assists decision-makers in the organization to predict future events on the basis of such events in the past. The organization uses this theory because decision-makers are afraid of results from the decisions they make. However, the path dependency theory has negative effects on this organization. This is because it creates rigidity especially in the case where this organization introduced new arrangements in the institution.
This effect is clear in the present trading restrictions on the Victorian water markets in Australia.
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