Evolutionary Economics Theory

An Evolutionary Economics Theory is an evolutionary theory for economic systems that applies principles of evolutionary biology to understand economic processes.

• Context:
  • It can (typically) analyze complex interdependency, competition, economic growth, structural change, and resource constraints within economies.
  • It can (typically) explain economic phenomena through the actions of diverse agents, learning from experience and interactions.
  • It can (often) incorporate concepts from evolutionary game theory, focusing on non-equilibrium processes and adaptive efficiency.
  • It can (often) utilize evolutionary psychology to address inconsistencies and biases in rational choice theory.
  • …
• Example(s):
  • One that explains technological innovation and industrial dynamics in terms of evolutionary competition and adaptation.
  • One that examines the development of economic institutions through the process of variation, selection, and retention.
  • One that explores market behavior and economic cycles using concepts from natural selection and evolutionary fitness.
  • …
• Counter-Example(s):
  • an Equilibrium Economics Theory, which focuses on static states and balance rather than dynamic processes.
  • a Classical Economics Theory, which emphasizes rational agents and market equilibrium without accounting for evolutionary processes.
• See: Mainstream Economics, Heterodox Economics, Economics, Evolutionary Biology, Interdependency, Competition, Economic Growth, Structural Change, Resource Constraint, Adaptive Market Hypothesis, Scarcity, Thorstein Veblen.

---

---

References

2014

• (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/Evolutionary_economics Retrieved:2014-9-24.
  • Evolutionary economics is part of mainstream economics as well as a heterodox school of economic thought that is inspired by evolutionary biology. Much like mainstream economics, it stresses complex interdependencies, competition, growth, structural change, and resource constraints but differs in the approaches which are used to analyze these phenomena. Evolutionary economics deals with the study of processes that transform economy for firms, institutions, industries, employment, production, trade and growth within, through the actions of diverse agents from experience and interactions, using evolutionary methodology. Evolutionary economics analyses the unleashing of a process of technological and institutional innovation by generating and testing a diversity of ideas which discover and accumulate more survival value for the costs incurred than competing alternatives. The evidence suggests that it could be adaptive efficiency that defines economic efficiency. Mainstream economic reasoning begins with the postulates of scarcity and rational agents (that is, agents modeled as maximizing their individual welfare), with the “rational choice” for any agent being a straightforward exercise in mathematical optimization. There has been renewed interest in treating economic systems as evolutionary systems in the developing field of Complexity economics. Evolutionary economics does not take the characteristics of either the objects of choice or of the decision-maker as fixed. Rather its focus is on the non-equilibrium processes that transform the economy from within and their implications. The processes in turn emerge from actions of diverse agents with bounded rationality who may learn from experience and interactions and whose differences contribute to the change. The subject draws more recently on evolutionary game theory and on the evolutionary methodology of Charles Darwin and the non-equilibrium economics principle of circular and cumulative causation. It is naturalistic in purging earlier notions of economic change as teleological or necessarily improving the human condition. A different approach is to apply evolutionary psychology principles to economics which is argued to explain problems such as inconsistencies and biases in rational choice theory. Basic economic concepts such as utility may be better viewed as due to preferences that maximized evolutionary fitness in the ancestral environment but not necessarily in the current one.

---