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Some comments below, Ed.
----- Original Message -----
Sent: Saturday, January 10, 2004 3:38
PM
Subject: Re: [Futurework] Two sorts of
evolutionary economics
Ed,
The trouble with the passage you quote below is
that in the first paragraph the writer is imputing to classical economists the
idea that perfect competition has already been arrived at. (That is, largely
on the whole -- there are always pockets of near-perfect competition in the
case of some products.) But there has rarely been perfect competition because
(nearly always) governments intervene by giving favours to some
parties.
Or some parties give favours to
themselves, or conspire to do so, or have special advantages. Perfect
competition is nothing more than a static theoretical device, not something
that you'd find out there in the real economy.
The "What if" scenarios which have become fashionable among
historians in recent years are not really anything to do with evolution except
in a very broad and general sense -- certainly not susceptible to the "for
want of a horshoe, the battle was lost" type arguments. They are more akin to
the sort of population adjustments that take place between different animal
species within an environment in which slight changes take place from time to
time (e.g. temperatures, rainfall, etc) -- and rather similar to the different
equilibria that can take place between molecules in a complex chemical
reaction.
I would suggest that "what if" scenarios can be very
useful to learning from history - as in what went wrong, or what was
overlooked, or how do we ensure that it doesn't happen again. For
example, institutions like central banks able to set monetary policy were
responses to crises that existed before their were such
banks.
My own cast of evolutionary economics is a much narrower view of
economics than usual these days but it is based a great deal more firmly on
evolution as it has actually happened -- that is, the permanent acquisition of
traits, particularly that of status seeking, sexual selection and social
inclusion. Although economics seems to be thrown in as an appendage, as it
were, it is very firmly linked to real-time evolution as it resulted in
us. (I have often used the example of red oxide trading going on 75,000 years
ago. This is way before what used to be considered the time of the origin of
man. Now that the latter has been pushed back to something like 100-150,000
years I wouldn't mind betting that, in due course, paleontologists will find
evidence of trading much nearer that date.)
Keith
Keith, when I read your version of evolutionary
economics, I often find myself wondering how and why it differs from
anthropology or evolutionary psychology. Your focus is very much on the
individual and not on the system. Your focus on the dominant male and
the need for red ochre hence the need for trade is not unlike something an
anthropologist would come up with, though I suppose an economist could
too. Economists, perhaps wrongly, tend not to focus on the individual or
the small tribe, but on the larger system - e.g. Marx who saw the economy
evolving into a worker's paradise via the dialectical process.
Ed
At 15:06 09/01/2004 -0500, you
wrote:
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 -----
- From: Keith Hudson
- To: [EMAIL PROTECTED]
- 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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Keith Hudson, Bath, England, <www.evolutionary-economics.org>
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