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Keith, there are views of evolutionary economics other
than yours and Schumpeter's. For example, in the following, the question
appears to be one of what historic facts made the economy or the market achieve
a particular equilibrium and not another of a range of possible
equilibria. Would we be better off if history had take a different course
and we had achieved one of the others? Essentially, if I have it right,
what the authors are suggesting is understanding the economy as the product
of historic selection and considering other possible outcomes by examining the
evolutionary effect of alternative historic selections.
Ed
Mainstream welfare economics has tied its flag to the competitive market as
the Panglosian structure that produces the best of all possible worlds. And of
course if we are in the best of all possible worlds, there is no scope for
regret. A perfect market allows no inefficiencies. This result has become a
central dogma for neo-classical economists, or at least for the hard core. In
the neo-classical rubric, when we observe a sub-optimal allocation in the
world (which cannot be explained away as a mis-description), the vocabulary of
explanation includes phrases like "market failure" or "market imperfection".
Sub-optimal allocations indicate some sort of aberration--an outcome that can
be considered "unnatural" in some way. Every neo-classical economist would
agree that there are deviations from the perfectly competitive ideal and that
some deviations cannot be fixed. But the point to note is that the starting
point, and the thing taken as somehow the natural way of the world (if only
governments would keep their hands to themselves) is competition, which, in
the long run at least, produces ideal outcomes.
On the other hand, in evolutionary economics Potential Regret may be the
outcome where multiple equilibria are common and need not be welfare
equivalent. The presence of multiple equilibria raises the issue of selection.
How do we get one equilibrium rather than another? For evolutionary economists
the answer to this question is typically "History." Selection mechanisms are
inherently historical. Historical processes can have the feature of path
dependence, and this is commonly present in evolutionary models. Here is the
moment at which the Potential Regret result arises. Had history taken a
different course in the past, we would now be at a different, and better,
position. The historicity present here implies that explanations which address
the issue of Potential Regret will necessarily be historical. The questions
"Is potential regret possible?", or "Is potential regret actual in this case?"
effectively ask what would have been the case had history taken a different
course. This is a counterfactual question, equivalent in this regard to the
question "What would be the effect on employment if the tax rate were reduced
by x%?" This paper is concerned with this type of counterfactual, and
in particular how the general tenets of evolutionary economics change the
nature of counterfactuals from those in neo-classical economics. (Robin Cowan* and Dominique Foray, Evolutionary Economics and the
Counterfactual Threat, April, 1999 (http://www.cgl.uwaterloo.ca/~racowan/counter.html)
----- Original Message -----
Sent: Friday, January 09, 2004 12:13
PM
Subject: [Futurework] Two sorts of
evolutionary economics
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
<<<<
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.
....
>>>>
Keith Hudson, Bath, England, <www.evolutionary-economics.org>
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