Path Dependence in Temporary Legislation

Abstract

What determines the fate of temporary legislation? In various settings, legal rules may contain expiration dates. While some provisions simply serve as temporary fixes, others perpetuate and transform into permanent fixtures of the law. What explains these different destinies?

To answer these questions, this Article draws on a case study of two widely used temporary programs with similar features yet dramatically different outcomes. One program became permanent while the other did not. Existing accounts in the literature that scrutinize repeated extensions of expiring legislation on the basis of public choice theory and political reasons are incomplete. While they may explain why such provisions are continued, they fail to elucidate why they lapse, die, or become permanent.

This Article demonstrates that path dependence theory can provide context and new answers to these questions. It reveals that the causes for different legislative routes go beyond structural or political rent-seeking. It demonstrates that policies may diverge in path dynamics, perceptions they epitomize, and instrumental goals in society. The Article not only enriches important and ongoing debates on the role of prior choices on present-day policies in healthcare, tax, antitrust, intellectual property, and renewable energy policies. It also provides important insights for policymakers on the forces behind “temporary-but-not-temporary” legislation.

Keywords: Path dependence, R&D, research credit, temporary legislation, sunset provisions

JEL Classification: K34