And we can also see the description of 2.8.6 more clearly now
it says that the path algebra is generated by the trivial paths, which are our $P_{ii}$, and the arrows $\alpha_i$, which are our $P_{i, i-1}$
Subject to relations which are essentially $P_{ii}^2 = P_{ii}$, $P_{ii} P_{i,i-1} = P_{i,i-1} P_{i-1,i-1} = P_{i,i-1}$ and $P_{ii} P_{jj} = P_{ii} P_{j,j-1} = 0$ when $i\neq j$
And indeed, the unique path $P_{ij}$ with $i>j$ can be represented as a product $\alpha_i \alpha_{i-1} \dots \alpha_{j + 1} = P_{i,i-1} P_{i-1,i-2} \dots P_{j+1,j}$