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Evolutionary Economics

Evolutionary Economics. Primary aim : make you acquainted to basic principles of the evolutionary approach to economics. Evolutionary Economics defined by its history:. Capitalist evolution an open-ended process of qualitative change (driven by innovations)

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Evolutionary Economics

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  1. Evolutionary Economics Primary aim: make you acquainted to basic principles of the evolutionary approach to economics

  2. Evolutionary Economics defined by its history: • Capitalist evolution an open-ended process of qualitative change (driven by innovations) • Innovations include institutional and organizational improvements of firms and the market context • International trade and FDI reflect the interaction between innovation and diffusion of technology at a global scale • Economic growth depends on the systemic properties of the imitations and technology diffusion that follow an innovation (Sectoral, Regional and National Systems of Innovation) • Schumpeter highly critical of attempts to apply theories from the natural sciences to economics

  3. For a survey of of literature on EE: • Fagerberg, J (2003), Schumpeter and the revival of evolutionary economics: an appraisal of the literature (in Journal of Evolutionary Economics 13:125-159)

  4. Evolutionary processes: • Competitive selection is analogous to Darwininan Natural selection (survival of the fittest) • Economic change when a firm substitutes one mob for another • firm = a repertoire of modes of behaviour (mob) • mob = a rule (routine) for making decisions or for the production of a product in a multi-product firm. • No average, profit-maximizing firm: A population of firms, where the probability for survival depends on realized profits.

  5. Analogies to biology? Darwinian change: Natural selection where genes mutate by chance Lamarckian change: Routines (mob:s) are changed through learning

  6. Haldane’s dilemma • If the probability for genetic change is small, then the cost of genetic change (the ratio of ‘selective deaths’ to ‘survivors’) has to be high. • But if the number of ‘selective deaths’ increases over a certain limit, the whole population will be eliminated • Hence, the rate of genetic change has to be slow

  7. Questions for discussion: • M. Friedman has argued that profit-maximiser are the only firms that will survive competitive selection. Thus, the assumption about profit maximisation in mainstream economics is the most adequate behavioural rule for predicting economic processes. • Do you agree? • Assess the importance of a) Darwinian change and b) Lamarckian change. Does the two types of change make any difference for the policy-maker, for instance, with regard to type of social model to be implemented? • Do institutions for standardisation have any influence on growth by making mobs more or less uninvadable. Is a complete system of property rights prefereable?

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