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Evolutionary economics is part of
mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to ...
as well as a
heterodox In religion, heterodoxy (from Ancient Greek: , "other, another, different" + , "popular belief") means "any opinions or doctrines at variance with an official or orthodox position". Under this definition, heterodoxy is similar to unorthodoxy, w ...
school of
economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...
thought that is inspired by
evolutionary biology Evolutionary biology is the subfield of biology that studies the evolutionary processes (natural selection, common descent, speciation) that produced the diversity of life on Earth. It is also defined as the study of the history of life ...
. Much like
mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to ...
, it stresses complex interdependencies,
competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, ind ...
,
growth Growth may refer to: Biology * Auxology, the study of all aspects of human physical growth * Bacterial growth * Cell growth * Growth hormone, a peptide hormone that stimulates growth * Human development (biology) * Plant growth * Secondary grow ...
, structural change, and
resource constraint In economics, a budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint and a preference ...
s but differs in the approaches which are used to analyze these phenomena. Some scholars prefer to call their evolutionary theory by a different names. Samuel Bowles named it "evolutionary social science" and Joachim Rennstich called it "evolutionary systems theory". 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 analyzes 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 In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...
and
rational agent A rational agent or rational being is a person or entity that always aims to perform optimal actions based on given premises and information. A rational agent can be anything that makes decisions, typically a person, firm, machine, or software. T ...
s (that is, agents modeled as maximizing their individual welfare), with the " rational choice" for any agent being a straightforward
exercise Exercise is a body activity that enhances or maintains physical fitness and overall health and wellness. It is performed for various reasons, to aid growth and improve strength, develop muscles and the cardiovascular system, hone athletic ...
in
mathematical optimization Mathematical optimization (alternatively spelled ''optimisation'') or mathematical programming is the selection of a best element, with regard to some criterion, from some set of available alternatives. It is generally divided into two subfi ...
. There has been renewed interest in treating economic systems as evolutionary systems in the developing field of
Complexity economics Complexity economics is the application of complexity science to the problems of economics. It sees the economy not as a system in equilibrium, but as one in motion, perpetually constructing itself anew.Beinhocker, Eric D. The Origin of Wealth: E ...
. 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 Bounded rationality is the idea that rationality is limited when individuals make decisions, and under these limitations, rational individuals will select a decision that is satisfactory rather than optimal. Limitations include the difficulty o ...
who may learn from experience and interactions and whose differences contribute to the change. The subject draws more recently on
evolutionary game theory Evolutionary game theory (EGT) is the application of game theory to evolving populations in biology. It defines a framework of contests, strategies, and analytics into which Darwinian competition can be modelled. It originated in 1973 with John M ...
and on the
evolution Evolution is change in the heritable characteristics of biological populations over successive generations. These characteristics are the expressions of genes, which are passed on from parent to offspring during reproduction. Variation ...
ary methodology of
Charles Darwin Charles Robert Darwin ( ; 12 February 1809 – 19 April 1882) was an English naturalist, geologist, and biologist, widely known for his contributions to evolutionary biology. His proposition that all species of life have descended ...
and the non-equilibrium economics principle of circular and cumulative causation. It is naturalistic in purging earlier notions of economic change as
teleological Teleology (from and )Partridge, Eric. 1977''Origins: A Short Etymological Dictionary of Modern English'' London: Routledge, p. 4187. or finalityDubray, Charles. 2020 912Teleology" In ''The Catholic Encyclopedia'' 14. New York: Robert Appleton ...
or necessarily improving the human condition. A different approach is to apply
evolutionary psychology Evolutionary psychology is a theoretical approach in psychology that examines cognition and behavior from a modern evolutionary perspective. It seeks to identify human psychological adaptations with regards to the ancestral problems they evo ...
principles to economics which is argued to explain problems such as inconsistencies and biases in
rational choice theory Rational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory originated in the eighteenth century and can be traced back to political economist and philosopher, Adam Smith. The theory postula ...
. Basic economic concepts such as
utility As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophe ...
may be better viewed as due to preferences that maximized evolutionary fitness in the ancestral environment but not necessarily in the current one.Paul H. Rubin and C. Monica Capra. The evolutionary psychology of economics. In


Predecessors

In the mid-19th century,
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
presented a schema of stages of historical development, by introducing the notion that
human nature Human nature is a concept that denotes the fundamental dispositions and characteristics—including ways of thinking, feeling, and acting—that humans are said to have naturally. The term is often used to denote the essence of humankind, or ...
was not constant and was not determinative of the nature of the social system; on the contrary, he made it a principle that human behavior was a function of the social and economic system in which it occurred. Marx based his theory of economic development on the premise of developing
economic system An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entit ...
s; specifically, over the course of history superior economic systems would replace inferior ones. Inferior systems were beset by internal contradictions and inefficiencies that make them impossible to survive over the long term. In Marx's scheme,
feudalism Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structu ...
was replaced by
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private ...
, which would eventually be superseded by
socialism Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes th ...
.''Gregory and Stuart''. (2005) ''Comparing Economic Systems in the Twenty-First Century'', Seventh Edition, South-Western College Publishing, At approximately the same time,
Charles Darwin Charles Robert Darwin ( ; 12 February 1809 – 19 April 1882) was an English naturalist, geologist, and biologist, widely known for his contributions to evolutionary biology. His proposition that all species of life have descended ...
developed a general framework for comprehending any process whereby small, random variations could accumulate and predominate over time into large-scale changes that resulted in the emergence of wholly novel forms ("
speciation Speciation is the evolutionary process by which populations evolve to become distinct species. The biologist Orator F. Cook coined the term in 1906 for cladogenesis, the splitting of lineages, as opposed to anagenesis, phyletic evolution withi ...
"). This was followed shortly after by the work of the American pragmatic philosophers ( Peirce, James, Dewey) and the founding of two new disciplines,
psychology Psychology is the science, scientific study of mind and behavior. Psychology includes the study of consciousness, conscious and Unconscious mind, unconscious phenomena, including feelings and thoughts. It is an academic discipline of immens ...
and
anthropology Anthropology is the scientific study of humanity, concerned with human behavior, human biology, cultures, societies, and linguistics, in both the present and past, including past human species. Social anthropology studies patterns of be ...
, both of which were oriented toward cataloging and developing explanatory frameworks for the variety of
behavior Behavior (American English) or behaviour (British English) is the range of actions and mannerisms made by individuals, organisms, systems or artificial entities in some environment. These systems can include other systems or organisms as we ...
patterns (both individual and collective) that were becoming increasingly obvious to all systematic observers. The state of the world converged with the state of the evidence to make almost inevitable the development of a more "modern" framework for the analysis of substantive economic issues.


Veblen (1898)

Thorstein Veblen Thorstein Bunde Veblen (July 30, 1857 – August 3, 1929) was a Norwegian-American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism. In his best-known book, ''The Theory of the Leisure Class'' ...
(1898) coined the term "evolutionary economics" in English. He began his career in the midst of this period of intellectual ferment, and as a young scholar came into direct contact with some of the leading figures of the various movements that were to shape the style and substance of
social science Social science is one of the branches of science, devoted to the study of societies and the relationships among individuals within those societies. The term was formerly used to refer to the field of sociology, the original "science of s ...
s into the next century and beyond. Veblen saw the need for taking account of cultural variation in his approach; no universal "human nature" could possibly be invoked to explain the variety of norms and behaviors that the new science of anthropology showed to be the rule, rather than the exception. He emphasis zed the conflict between "industrial" and "pecuniary" or ceremonial values and this Veblenian dichotomy was interpreted in the hands of later writers as the "ceremonial/instrumental dichotomy" (Hodgson 2004); Veblen saw that every culture is materially based and dependent on tools and skills to support the "life process", while at the same time, every culture appeared to have a stratified structure of status ("invidious distinctions") that ran entirely contrary to the imperatives of the "instrumental" (read: "technological") aspects of group life. The "ceremonial" was related to the past, and conformed to and supported the tribal legends; "instrumental" was oriented toward the technological imperative to judge value by the ability to control future consequences. The "Veblenian dichotomy" was a specialized variant of the "
instrumental An instrumental is a recording normally without any vocals, although it might include some inarticulate vocals, such as shouted backup vocals in a big band setting. Through semantic widening, a broader sense of the word song may refer to inst ...
theory of value" due to John Dewey, with whom Veblen was to make contact briefly at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
. Arguably the most important works by Veblen include, but are not restricted to, his most famous works (''
The Theory of the Leisure Class ''The Theory of the Leisure Class: An Economic Study of Institutions'' (1899), by Thorstein Veblen, is a treatise of economics and sociology, and a critique of conspicuous consumption as a function of social class and of consumerism, which ...
''; ''
The Theory of Business Enterprise ''The Theory of Business Enterprise'' is an economics (or political economy) book by Thorstein Veblen, published in 1904, that looks at the growing corporate domination of culture and the economy. Summary At its heart, ''The Theory of Business Ent ...
''), but his monograph ''Imperial Germany and the Industrial Revolution'' and the 1898 essay entitled ''Why is Economics not an Evolutionary Science'' have both been influential in shaping the research agenda for following generations of social scientists. TOLC and TOBE together constitute an alternative construction on the neoclassical marginalist theories of consumption and production, respectively. Both are founded on his dichotomy, which is at its core a valuational principle. The ceremonial patterns of activity are not bound to any past, but to one that generated a specific set of advantages and prejudices that underlie the current institutions. "Instrumental" judgments create benefits according to a new criterion, and therefore are inherently subversive. This line of analysis was more fully and explicitly developed by Clarence E. Ayres of the
University of Texas at Austin The University of Texas at Austin (UT Austin, UT, or Texas) is a public research university in Austin, Texas. It was founded in 1883 and is the oldest institution in the University of Texas System. With 40,916 undergraduate students, 11,075 ...
from the 1920s.


Schumpeter

Joseph A. Schumpeter , who lived in the first half of the 20th century, was the author of the book ''The Theory of Economic Development'' (1911, transl. 1934). It is important to note that for the word ''development'' he used in his native language, the German word "Entwicklung", which can be translated as development or evolution. The translators of the day used the word "development" from the French "développement", as opposed to "evolution" as this was used by Darwin. (Schumpeter, in his later writings in English as a professor at Harvard, used the word "evolution".) The current term in common use is
economic development In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and ...
. In Schumpeter's book, he proposed an idea radical for its time: the evolutionary perspective. He based his theory on the assumption of usual
macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, an ...
equilibrium, which is something like "the normal mode of economic affairs". This equilibrium is being perpetually destroyed by
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...
s who try to introduce
innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed enti ...
s. A successful introduction of an innovation (i.e. a
disruptive technology In business theory, disruptive innovation is innovation that creates a new market and value network or enters at the bottom of an existing market and eventually displaces established market-leading firms, products, and alliances. The concept ...
) disturbs the normal flow of economic life, because it forces some of the already existing technologies and means of production to lose their positions within the economy. His vision and economics inspired many economists who wanted to study how the economy develops and lead to a now powerful International Joseph A. Schumpeter Society.


Later development

A seminal article by
Armen Alchian Armen Albert Alchian (; April 12, 1914February 19, 2013) was an American economist. He spent almost his entire career at the University of California, Los Angeles (UCLA). A major microeconomic theorist, he is known as one of the founders of new i ...
(1950) argued for adaptive success of firms faced with uncertainty and incomplete information replacing
profit maximization In economics, profit maximization is the short run or long run process by which a firm may determine the price, input and output levels that will lead to the highest possible total profit (or just profit in short). In neoclassical economics, ...
as an appropriate modeling assumption.
Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
proposed that markets act as major selection vehicles. As
firm A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared ...
s compete, unsuccessful rivals fail to capture an appropriate market shar e, go
bankrupt Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...
and have to exit. The variety of competing firms is both in their products and practices, that are matched against markets. Both products and practices are determined by routines that firms use: standardized patterns of actions implemented constantly. By imitating these routines, firms propagate them and thus establish inheritance of successful practices.
Kenneth Boulding Kenneth Ewart Boulding (; January 18, 1910 – March 18, 1993) was an English-born American economist, educator, peace activist, and interdisciplinary philosopher.David LatzkoKenneth E. Boulding Commentsat personal.psu.edu. Accessed 24 April 200 ...
was one of the advocates of the evolutionary methods in social science, as is evident from
Kenneth Boulding's Evolutionary Perspective Kenneth E. Boulding's evolutionary perspective is an approach to economics (see also evolutionary economics) put forward most completely in his ''Ecodynamics'' (1978) and ''Evolutionary Economics'' (1981) had roots in his 1934 work on population t ...
.
Kenneth Arrow Kenneth Joseph Arrow (23 August 1921 – 21 February 2017) was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972. In economi ...
,
Ronald Coase Ronald Harry Coase (; 29 December 1910 – 2 September 2013) was a British economist and author. Coase received a bachelor of commerce degree (1932) and a PhD from the London School of Economics, where he was a member of the faculty until 1951. ...
and
Douglass North Douglass Cecil North (November 5, 1920 – November 23, 2015) was an American economist known for his work in economic history. He was the co-recipient (with Robert William Fogel) of the 1993 Nobel Memorial Prize in Economic Sciences. In the wo ...
are some of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel winners who are known for their sympathy to the field. More narrowly the works
Jack Downie Jack Downie (September 1919 – 1963) was a British economist who is famous for writing ''The Competitive Process''. Nightingale discusses the "short but brilliant career" of economist Jack Downie, emphasising the importance of his theory of ''T ...
and Edith Penrose offer many insights for those thinking about evolution at the level of the firm in an industry.


Nelson and Winter (1982) and after

Richard R. Nelson and
Sidney G. Winter Sidney Graham Winter (born 1935, in Iowa City, Iowa) is an American economist and Professor Emeritus of Management at the Wharton School, University of Pennsylvania. He is recognized as a leading figures in the revival of evolutionary economics. ...
's book An Evolutionary Theory of Economic Change (1982, Paperback 1985)Richard R. Nelson and Sidney Winter (1982) An Evolutionary Theory of Economic Change. Cambridge: Mass, Harvard University Press. Paperback edition: Belknap Press of Harvard University Press. was a real seminal work that marked a renaissance of evolutionary economics. It lead to the dissemination of the evolutionary ideas among wide strands of economists and was followed by foundations of International Joseph A. Schumpeter Society, European Association for Evolutionary Political Economy, Japan Association for Evolutionary Economics, and Korean Society for Innovation Management and Economics. Nelson and Winter have focused mostly on the issue of changes in
technology Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, scien ...
and routines, suggesting a framework for their analysis. Evolution and change must be distinguished. Prices and quantities constantly change but it is not an evolution. For an evolution takes place, there must be something that evolves. Their approach can be compared and contrasted with the
population ecology Population ecology is a sub-field of ecology that deals with the dynamics of species populations and how these populations interact with the environment, such as birth and death rates, and by immigration and emigration. The discipline is import ...
or organizational ecology approach in sociology: see Douma & Schreuder (2013, chapter 11). More recently, Nelson, Dosi, Pyka, Malerba,
Winter Winter is the coldest season of the year in polar and temperate climates. It occurs after autumn and before spring. The tilt of Earth's axis causes seasons; winter occurs when a hemisphere is oriented away from the Sun. Different cultur ...
and other scholars have been proposing an update of the state-of-art in evolutionary economics. Evolution and change must be distinguished. Prices, quantities and GDPs constantly change through time but they are not evolution. Pier P. Saviotti pointed out as key concepts of evolution three ideas: variation, selection, and reproduction.Saviotti, P.P. (1996) Technological Evolution, Variety and the Economy. Edward Elgar, Cheltenham, UK. pp.42-48. The concept of reproduction is often replaced by replication or retention. Retention is preferred in evolutionary organization theory. Other related concepts are fitness, adaptation, population, interactions, and environment. Each item is related to selection,
learning Learning is the process of acquiring new understanding, knowledge, behaviors, skills, values, attitudes, and preferences. The ability to learn is possessed by humans, animals, and some machines; there is also evidence for some kind of lea ...
,
population dynamics Population dynamics is the type of mathematics used to model and study the size and age composition of populations as dynamical systems. History Population dynamics has traditionally been the dominant branch of mathematical biology, which has a ...
, economic transactions, and boundary conditions. Nelson and Winter raised two major examples of evolving entities: technologies and organizational routines. Yoshinori Shiozawa listed four entities that evolve: economic behaviors, commodities, technologies, and institutions.Shiozawa, Y. (2004) Evolutionary Economics in the 21st Century: A Manifesto. Evolutionary and Institutional Economics Review 1(1): 5-47. Then, mechanisms that provide selection, generate variation and establish self-replication, must be identified. A general theory of this evolutionary process has been proposed by Kurt Dopfer, John Foster and Jason Potts as the micro meso macro framework. If the change occurs constantly in the economy, then some kind of evolutionary process must be in action, and there has been a proposal that this process is Darwinian in nature. Other economists claimed that evolution of human behaviors can be Lamarckian. Evolutionary economics had developed and ramified into various fields or topics. They include technology and economic growth,
institutional economics Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the ...
, organization studies, innovation study, management, and policy, and criticism of mainstream economics. Economic processes, as part of life processes, are intrinsically evolutionary. From the evolutionary equation that describe life processes, an analytical formula on the main factors of economic processes, such as fixed cost and variable cost, can be derived. The economic return, or competitiveness, of economic entities of different characteristics under different kinds of environment can be calculated. The change of environment causes the change of competitiveness of different economic entities and systems. This is the process of evolution of economic systems. In recent years, evolutionary models have been used to assist decision making in applied settings and find solutions to problems such as optimal product design and service portfolio diversification.


Why does evolution matter in economics

Evolutionary economics emerged from dissatisfaction of mainstream (neoclassical) economics. Mainstream economics mainly assumes agents that optimize their objective functions, such as utility function for consumers and profit for firms. Optimization under budget constraint has a solution if the function is continuous and the prices are positive. However, when the number of goods is large, it is often difficult to obtain the bundles of goods that maximize the utility.Shiozawa, Y., Morioka, M., and Taniguchi, K. (2019) Microfoundations of Evolutionary Economics, Springer Japan, Tokyo. Ch. 1 with the same title as the book itself. This is the question of
bounded rationality Bounded rationality is the idea that rationality is limited when individuals make decisions, and under these limitations, rational individuals will select a decision that is satisfactory rather than optimal. Limitations include the difficulty o ...
. Herbert A. Simon once stated in
Administrative Behavior ''Administrative Behavior: a Study of Decision-Making Processes in Administrative Organization'' is a book written by Herbert A. Simon (1916–2001). It asserts that "decision-making is the heart of administration, and that the vocabulary of admini ...
that whole contents of management science can be reduced to two lines. The same contentions apply to the economics. Most of economics behaviors except deliberated plans are routines which follows satisficing principle. Evolutionary economics is conceived as an economics of large complex system.


Evolutionary psychology

A different approach is to apply
evolutionary psychology Evolutionary psychology is a theoretical approach in psychology that examines cognition and behavior from a modern evolutionary perspective. It seeks to identify human psychological adaptations with regards to the ancestral problems they evo ...
principles to economics which is argued to explain problems such as inconsistencies and biases in
rational choice theory Rational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory originated in the eighteenth century and can be traced back to political economist and philosopher, Adam Smith. The theory postula ...
. A basic economic concept such as
utility As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophe ...
may be better explained in terms of a set of biological preferences that maximized evolutionary fitness in the ancestral environment but not necessarily in the current one. In other words, the preferences for actions/decisions that promise "utility" (e.g. reaching for a piece of cake) were formed in the ancestral environment because of the adaptive advantages of such decisions (e.g. maximizing calorie intake). Loss aversion may be explained as being rational when living at subsistence level where a reduction of resources may have meant death and it thus may have been rational to place a greater value on losses than on gains. People are sometimes more cooperative and altruistic than predicted by economic theory which may be explained by mechanisms such as
reciprocal altruism In evolutionary biology, reciprocal altruism is a behaviour whereby an organism acts in a manner that temporarily reduces its fitness while increasing another organism's fitness, with the expectation that the other organism will act in a similar m ...
and group selection for cooperative behavior. An evolutionary approach may also explain differences between groups such as males being less risk-averse than females since males have more variable reproductive success than females. While unsuccessful risk-seeking may limit reproductive success for both sexes, males may potentially increase their reproductive success much more than females from successful risk-seeking. Frequency-dependent selection may explain why people differ in characteristics such as cooperative behavior with cheating becoming an increasingly less successful strategy as the numbers of cheaters increase. Economic theory is at present characterized by strong disagreements on which is the correct theory of value, distribution and growth. This also influences the attempts to find evolutionary explanations for modern tastes and preferences. For example an acceptance of the neoclassical theory of value and distribution lies behind the argument that humans have a poor intuitive grasp of the economics of the current environment which is very different from the ancestral environment. The argument is that ancestral environment likely had relatively little
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct exc ...
,
division of labor The division of labour is the separation of the tasks in any economic system or organisation so that participants may specialise (specialisation). Individuals, organizations, and nations are endowed with, or acquire specialised capabilities, and ...
, and
capital good The economic concept of a capital good (also called complex product systems (CoPS),H. Rush, "Managing innovation in complex product systems (CoPS)," IEE Colloquium on EPSRC Technology Management Initiative (Engineering & Physical Sciences Researc ...
s. Technological change was very slow, wealth differences were much smaller, and possession of many available resources were likely zero-sum games where large inequalities were caused by various forms of exploitation. Humans, therefore, may have poor intuitive understanding of the benefits of
free trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econ ...
(causing calls for
protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulation ...
), the value of capital goods (making the
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The LTV is usually associated with Marxian ...
appealing), and may intuitively undervalue the benefits of technological development. The same acceptance of the neoclassical thesis that demand for labour is a decreasing function of the real wage and that income differences reflect different marginal productivities of individual contributions (in labour or savings) lies behind the argument that persistence of pre-capitalist model of thinking may explain a tendency to see the number of available jobs as a zero-sum game with the total number of jobs being fixed which causes people to not realize that
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. B ...
laws reduce the number of jobs or to believe that an increased number of jobs in other nations necessarily decreases the number of jobs in their own nation, as well as a tendency to view large
income inequality There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of we ...
as due to exploitation rather than as due to individual differences in
productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
. This, it is accordingly argued, may easily cause poor economic policies, especially since individual voters have few incentives to make the effort of studying societal economics instead of relying on their intuitions since an individual's vote counts for so little and since politicians may be reluctant to take a stand against intuitive views that are incorrect but widely held. Most non-neoclassical schools of thought would not judge calls for protectionism necessarily mistaken nor would agree that minimum wage laws reduce the number of jobs nor would reject the basic intuition imperfectly expressed by the labour theory of value and now more rigorously argued by modern Marxian-Sraffian theory (namely, that exploitation is present under capitalism too), and therefore would judge this specific evolutionary argument strictly to depend on a questionable theory of the working of market economies.


Evolution after Unified Growth Theory

The role of evolutionary forces in the process of economic development over the course of human history has been explored in the past few decades.
Oded Galor Oded Galor (born 1953) is an Israeli-American economist who is currently Herbert H. Goldberger Professor of Economics at Brown University. He is the founder of unified growth theory. Galor has contributed to the understanding of process of deve ...
and Omer Moav advanced the hypothesis that evolutionary forces had a significant role in the transition of the world economy from stagnation to growth, highlighting the persistent effects that historical and prehistorical conditions have had on the evolution of the composition of human characteristics during the development process. Galor and Moav argued that the Malthusian pressure determined the size and the composition of the human population. Lineages whose traits were complementary to the economic environment had higher income, and therefore higher reproductive success, and the inevitable propagation of these traits fostered the growth process and ultimately contributed to the take-off from an epoch of stagnation to the modern era of sustained growth.


Evolution of predisposition towards child quality

Galor and Moav hypothesize that during the Malthusian epoch, natural selection has amplified the prevalence of traits associated with predispositions towards the child quality in the human population, triggering human capital formation, technological progress, the onset of the demographic transition, and the emergence of  sustained economic growth. The testable predictions of this evolutionary theory and its underlying mechanisms have been confirmed empirically and quantitatively. Specifically, the genealogical record of half a million people in Quebec during the period 1608-1800, suggests that moderate fecundity, and hence tendency towards investment in child quality, was beneficial for long-run reproductive success. This finding reflect the adverse effect of higher fecundity on marital age of children, their level of education, and the likelihood that they will survive to a reproductive age.


Evolution of time preference

Oded Galor and Omer Ozak examine the evolution of time preference in the course of human history. They hypothesize and establish empirically that agricultural characteristics that were favorable to higher return to agricultural investment in the Malthusian era triggered a process of selection, adaptation, and learning that increase the prevalence of long-term orientation among individuals in society. They further establish the variations in these agricultural characteristics across the globe are associated with contemporary differences in economic and human behavior such as technological adoption, education, saving, and smoking.


Evolution of loss aversion

Oded Galor and Viacheslav Savitskiy explore the evolutionary foundation of the phenomenon of loss aversion. They theorize and confirm empirically that the evolution of loss aversion reflects an evolutionary process in which humans have gradually adapted the climatic shocks and their asymmetric effects on reproductive success in a period in which the available resource was very close to the subsistence consumption. In particular, they establish that individuals and ethnic groups that descended from regions that are characterized by greater climatic volatility tend to be loss-neutral, whereas those originated in regions in which climatic conditions are more spatially correlated, tend to be more loss averse.


Evolution of risk aversion

Oded Galor and Stelios Michalopoulos examine the coevolution of entrepreneurial spirit and the process of long-run economic development. Specifically, they argue that in the early stages of development, risk-tolerant entrepreneurial traits generated an evolutionary advantage, and the rise in the prevalence of this trait amplified the pace of the growth process. However, in advanced stages of development, risk-aversion gained an evolutionary advantage, and contributed to convergence across countries.


See also

*
Behavioral economics Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ...
*
Complexity economics Complexity economics is the application of complexity science to the problems of economics. It sees the economy not as a system in equilibrium, but as one in motion, perpetually constructing itself anew.Beinhocker, Eric D. The Origin of Wealth: E ...
*
Creative destruction Creative destruction (German: ''schöpferische Zerstörung'') is a concept in economics which since the 1950s is the most readily identified with the Austrian-born economist Joseph Schumpeter who derived it from the work of Karl Marx and pop ...
*
Cultural economics __NOTOC__ Cultural economics is the branch of economics that studies the relation of culture to economic outcomes. Here, 'culture' is defined by shared beliefs and preferences of respective groups. Programmatic issues include whether and how muc ...
*
EAEPE The European Association for Evolutionary Political Economy (EAEPE) is a pluralist forum of social scientists that brings together institutional and evolutionary economists broadly defined. EAEPE members are scholars working on realistic appro ...
* Ecological model of competition *
Evolutionary socialism Eduard Bernstein (; 6 January 1850 – 18 December 1932) was a German social democratic Marxist theorist and politician. A member of the Social Democratic Party of Germany (SPD), Bernstein had held close association to Karl Marx and Friedric ...
*
Hypergamy Hypergamy (colloquially referred to as "marrying up") is a term used in social science for the act or practice of a person marrying a spouse of higher caste or social status than themselves. The antonym "hypogamy" refers to the inverse: marryin ...
*
Institutional economics Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the ...
*
Population dynamics Population dynamics is the type of mathematics used to model and study the size and age composition of populations as dynamical systems. History Population dynamics has traditionally been the dominant branch of mathematical biology, which has a ...
* Innovation system * Non-equilibrium economics *
Universal Darwinism Universal Darwinism, also known as generalized Darwinism, universal selection theory, or Darwinian metaphysics, is a variety of approaches that extend the theory of Darwinism beyond its original domain of biological evolution on Earth. Universal ...
* Evolutionary and Institutional Economics Review * Giovanni Dosi * Robert H. Frank


References


Further reading

*
Aldrich, Howard E. Howard E. Aldrich (born 1943) is an American sociologist who is Kenan Professor of Sociology and Professor of Entrepreneurship at the University of North Carolina at Chapel Hill. He is also a Faculty Research Associate at the Department of Stra ...
, Geoffrey M. Hodgson, David L. Hull, Thorbjørn Knudsen, Joel Mokyr and Viktor J. Vanberg (2008) ‘In Defence of Generalized Darwinism’, ''Journal of Evolutionary Economics'', 18(5), October, pp. 577–96. * Canterbery, E. Ray (1998) The Theory of the Leisure Class'' and the Theory of Demand', in Warren G. Samuels (editor), ''The Founding of Institutional Economics'' (London and New York: Routledge) pp. 139-56. *
Douma, Sytse Sytse Wybren Douma (born 1942) is a Dutch organizational theorist, consultant and Emeritus Professor at the Tilburg School of Economics and Management of the Tilburg University, known for his work with Hein Schreuder on "Economic approaches to orga ...
& Hein Schreuder (2013). "Economic Approaches to Organizations". 5th edition. London: Pearson. * Hodgson, Geoffrey M. (2004) ''The Evolution of Institutional Economics: Agency, Structure and Darwinism in American Institutionalism'' (London and New York: Routledge). * Richard R. Nelson and
Sidney G. Winter Sidney Graham Winter (born 1935, in Iowa City, Iowa) is an American economist and Professor Emeritus of Management at the Wharton School, University of Pennsylvania. He is recognized as a leading figures in the revival of evolutionary economics. ...
. (1982).
An Evolutionary Theory of Economic Change
'. Harvard University Press. * Shiozawa, Yoshinori (2004) Evolutionary Economics in the 21st Century: A Manifext, ''Evolutionary and Institutional Economics Review'' 1(1), November, pp. 5–47. * * Veblen, Thorstein B. (1898) ‘Why Is Economics Not an Evolutionary Science?’, ''Quarterly Journal of Economics'', 12(3), July, pp. 373–97. * Madureira, A., den Hartog, F. & Baken, N., "A holonic framework to understand and apply information processes in evolutionary economics: survey and proposal", Netnomics (2016) 17: 157. doi:10.1007/s11066-016-9107-1 (http://rdcu.be/nqEg).


Journals

* ''Journal of Economic Issues'', sponsored by the Association for Evolutionary Economics

* ''Journal of Evolutionary Economics''
Description
sponsored by the International Josef Schumpeter Society. * ''Journal of Institutional Economics'', sponsored by the European Society for Evolutionary Political Economy. *
and Institutional Economics Review''
sponsored by the Japan Association for Evolutionary Economics (Springer).
"The Nature of Value: How to invest in the Adaptive economy"
book on the economy as an evolutionary system * ''Netnomics'' (Springer)


External links

*
"Evolutionary Economics et al." by Prof. Esben S. Andersen
- Aalborg University, Denmark

{{DEFAULTSORT:Evolutionary economics Innovation economics Schools of economic thought Dichotomies Thorstein Veblen