[Futurework] Two sorts of evolutionary economics

[Keith Hudson]

249. Two sorts of evolutionary economics

Most of the papers written by evolutionary economists -- in as far as I understand them -- are using the term, 'evolutionary economics', in the same sense that Joseph Schumpeter did in his famous work, Capitalism, Socialism and Democracy. However, he is not really using the term in its correct sense. He really means 'developmental' economics. This can be seen in the following passage from his book.

An evolutionary system actually produces a multitude of branches like a great tree. As a new species breaks away from its branch it may brachiate again in due course, but sooner or later it proceeds only a little way further forward in a developmental-evolutionary way before coming to a full stop as a terminal twig as it finally accommodates itself harmoniously with the surrounding environment. Yet what Schumpeter talks about is the successive wholesale replacement of one particular technology, or consumer product, by another, not of brachiation. I don't quarrel with his description of this process as shown below, and I certainly don't quarrel with his use of the term 'Creative Destruction' -- one of the most outstanding insights in the whole field of economics -- but I am just suggesting that what he is writing about is not, strictly, speaking, evolutionary but, rather, developmental, even if it might be violent on occasion.

In contrast, my use of the term evolutionary economics involves the fact that as homo sapiens evolved we were endowed with strong genetic predispositions. Among these is a strong need for status within the social group, particularly obvious in the case of the male. In turn, this need for status caused early man to trade for items which enhanced, or consolidated, the status of the male; and, in turn, it was this early trading that, ultimately, produced the variety of products and economic institutions that we find ourselves with today.

That being said, I remain a great admirer of Schumpeter and the following passage shows is where he introduces his concept of Creative Destruction for the first time.

Keith Hudson

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Excerpt from CAPITALISM, SOCIALSM AND DEMOCRACY (pp82/83)

The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process. It may seem strange that anyone can fail to see so obvious a fact which moreover was long ago emphasized by Karl Marx. Yet that fragmentary analysis which yields the bulk of our propositions about the functioning of modern capitalism persistently neglects it. Let us restate the point and see how it bears upon our problem.

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the da'ta of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.

As we have seen in the preceding chapter, the contents of the laborer's budget, say from 1760 to 1940, did not simply grow on unchanging lines but they underwent a process of qualitative change. Similarly, the history of the productive apparatus of a typical farm, from the beginnings of the rationalization of crop rotation, plowing and fattening to the mechanized thing of today -- linking up with elevators and railroads -- is a history of revolutions. So is the history of the productive apparatus of the iron and steel industry from the charcoal furnace to our own type of furnace, or the history of the apparatus of power production from the overshot water wheel to the modern power plant, or the history of transportation from the mail-coach to the airplane. The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. ....
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