Evolutionary Economics: Program and Scope RECENT ECONOMIC THOUGHT SERIES Editors: William Darity, Jr. James K. Galbraith University of North Carolina University of Texas at Austin Chapel Hill, North Carolina, USA Austin, Texas, USA Other books in the series: Schofield, Nonnan: COLLECTIVE DECISION-MAKING: SOCIAL CHOICE AND POLITICAL ECONOMY Menchik, Paul L.: HOUSEHOLD AND FAMILY ECONOMICS Gupta, Kanhaya L.: EXPERIENCES WITH FINANCIAL LIBERALIZATION Cohen, Avi J., Hagemann, Harald, and Smithin, John: MONEY FINANCIAL INSTITUTIONS AND MACROECONOMICS Mason, P.L. and Williams, R.M.: RACE, MARKETS, AND SOCIAL OUTCOMES Gupta, Satya Dev: THE POLITICAL ECONOMY OF GLOBALIZATION Fisher, R.C.: INTERGOVERNMENTAL FISCAL RELATIONS Mariussen, A. and Wheelock, 1.: HOUSEHOLDS, WORK AND ECONOMIC CHANGE: A COMPARATIVE INSTITUTIONAL PERSPECTIVE Gupta, Satya Dev: GLOBALIZATION, GROWTH AND SUST AINABILITY Gupta, Satya Dev: DYNAMICS OF GLOBALIZATION AND DEVELOPMENT Medema, Steven G.: COASEAN ECONOMICS: LAW AND ECONOMICS AND THE NEW INSTITUTIONAL ECONOMICS Peoples, James: REGULATORY REFORM AND LABOR MARKETS Dennis, Ken: RATIONALITY IN ECONOMICS: AL TERNA TIVE PERSPECTIVES Ahiakpor, James C.W.: KEYNES AND THE CLASSICS RECONSIDERED Wolfson, Murray: THE POLITICAL ECONOMY OF WAR AND PEACE Jain, A.K.: ECONOMICS OF CORRUPTION Wheelock, J. and Vail, 1.: WORK AND IDLENESS: THE POLITICAL ECONOMY OF FULL EMPLOYMENT Dean, James M. and Watennan, A. M.C.: RELITION AND ECONOMICS: NORMATIVE SOCIAL THEORY Gupta, Kanhaya: FOREIGN AID: NEW PERSPECTIVES MacDonald, R. and Stein, J.: EQUILIBRIUM EXCHANGE RATES Chilcote, Ronald M.: THE POLITICAL ECONOMY OF IMPERIALISM: CRITICAL APPRAISALS Silber, Jacques: HANDBOOK ON INCOME INEQUALITY MEASUREMENT Elsner, W. and Groenewegen, 1.: INDUSTRIAL POLICIES AFTER 2000 Young, W. And Zilberfarb, B.: IS-LM AND MODERN MACROECONOMICS Evolutionary Economics: Program and Scope edited by Kurt Dopfer University of St. Gallen ~. " SPRINGER SCIENCE+BUSINESS MEDIA, LLC Library of Congress Cataloging-in-Publication Data Evolutionary economics : program and scope / edited by Kurt Dopfer. p. cm. -- (Recent economic thought ser ies ; 74) lncludes bibliographical references and index. ISBN 978-94-010-3869-0 ISBN 978-94-010-0648-4 (eBook) DOI 10.1007/978-94-010-0648-4 1. Evolutionaryeconomics. 2. Neoclassical school of economics. I. Dopfer, Kurt. II. Series. HB97.3 .E957 2001 330.1--dc21 2001029843 Copyright © 2001 by Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 2001 Softcover reprint ofthe hardcover Ist edition 2001 AlI rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photo copying, recording, or otherwise, without the prior written permission of the publisher, Springer Science+Business Media, LLC Printed on acid-free pap er. Contents Contributing Authors vii INTRODUCTION 1 Evolutionary Economics - Framework for Analysis ~rt~~r 1 FOUNDATIONAL ISSUES Research Program and Ontology 2 Evolutionary Economics - An Interpretative Survey Ulrich Witt 45 3 On the Ontological Foundations of Evolutionary Economics Carsten Herrmann-Pillath 89 EVOLUTIONARY MACROECONOMICS Dynamics: Long-run View and Population Thinking 4 Evolutionary Approaches to Population Thinking and the Problem of Growth and Development J. Stanley Metcalfe 141 5 Evolutionary Perspectives on Economic Growth Richard R. Nelson 165 vi Statics: Division of Knowledge and Valuation Principles 6 The Evolutionary Principles of American Neoinstitutional Economics Paul D. Bush and Marc R. Tool 195 7 Knowledge and Meliorism in the Evolutionary Theory of F. A. Hayek Richard Langlois and MOfit M. Sabooglu 231 EVOLUTIONARY MICROECONOMICS Dynamics: Selection, Adaptation and Learning Processes 8 Selection Processes in Economics Brian Loasby 253 9 Adapting, Learning and Economizing Richard H. Day 277 Statics: Agency, Firm and Economic Structure 10 Early Signs of a Revolution in Microeconomics Jacques Lesourne 299 11 Evolutionary Theories of the Firm: Reconstruction and Relations to Contractual Theories Nicolai Foss 319 Subject Index 357 Contributing Authors PauiD. Bush Nicolai J. Foss Department of Economics Department of Industrial California State University Economics and Strategy Fresno Copenhagen Business School 5245 North Backer Avenue Howitzvej 60, 6th floor Fresno, CA 93740-0020 DK-2000 Copenhagen F U. S.A. Denmark Richard H. Day Carsten Herrmann-Pillath Department of Economics Lehrstuhl fUr University of Southern gesamtwirtschaftliche California und institutionelle Entwicklung University Park Universitat WittenlHerdecke Los Angeles, CA 90089-0253 Alfred-Herrhausen-Str.50 U.S.A. D-58448 Witten Germany Kurt Dopfer Institute of Economics FGN Richard Langlois Universitiit st. Gallen Department of Economics Sandrainstrasse 21 University of Connecticut 9010 St. Gallen 341 Mansfield Road Switzerland Box U-63, Room 328 Storrs, CT 06269-1063 U.S.A. viii Jacques Lesourne Miiftt M. Sabooglu Conservatoire National des Arts Institut des Sciences et Metiers Economiques et Sociales 2, Rue Conte Universite de Fribourg 75003 Paris Bureau 5116B France Misericorde 1700 Fribourg Switzerland Brian Loasby Department of Economics University of Stirling MarcR. Tool Stirling, FK 9 4LA 5708 McAdoo Avenue United Kingdom Sacramento, CA 95819-2516 U.S.A. J. Stanley Metcalfe School of Economic Studies Ulrich Witt University of Manchester Max-Plank-Institut zur Dover Street Building Erforschung von Oxford Road Wirtschaftssystemen Manchester M13 9PL Abteilung Evolutionsokonomik United Kingdom Kahlaische Strasse 10 07745 Jena Germany Richard R. Nelson School ofIntemational & Public Affairs Columbia University 420 West 118th Street New York, N.Y. 10027 U.S.A. 1 EVOLUTIONARY ECONOMICS: FRAMEWORK FOR ANALYSIS Kurt Dopfer* Major Streams: Classical, Neoclassical and Evolutionary Economics What is evolutionary economics? What are its paradigmatic-ontological foundations, and what would an evolutionary research program for economics look like? How do evolutionary ideas fit in with existing research programs and teaching curricula? Questions like these need to be considered by economists given the increasing number of publications which employ an • This introduction includes only references that relate to the work of the contributors or to the literature mentioned there. I acknowledge gratefully valuable suggestions and comments by Felicia Fai, John Gowdy, Brian Loasby, Matthias Klaes, Jason Potts, Klaus Rathe, Rolf Steppacher, Jack Vromen and Ulrich Witt. A token of gratitude goes also to Pascal van Griethuysen, Lukas Hagen and Silvia Brandli for their editorial assistance, and to Juli Irving Lessmann for her substantial assistance with regard to my English prose. All blame for the work as it stands should go to my address. 2 EVOLUTIONARY ECONOMICS: PROGRAM AND SCOPE evolutionary approach and the establishment of new scientific societies and journals which carry the label "evolutionary". The present volume brings together ten papers by economists who have made outstanding contributions to various fields of evolutionary economics. The classical economists of the second half of the 18th century detached economics from moral philosophy, developing it into an independent discipline. The new discipline dealt with two grand questions. Firstly, how could order arise from the interactions of autonomous individuals without governmental intervention? This question became central after the social schemes of the ancien regime that regulated occupations and prices broke down and the citizens became largely autonomous in making their own decisions in the market place. Following Ferguson's recognition that market order is "the result of human action, but not the execution of any human design" (quoted in Langlois' and Sabooglu's paper), Adam Smith was the first to provide cues for an understanding of how markets could organize themselves and order could, in a context of autonomous and self-interested individuals, arise spontaneously. The second historical phenomenon that has called for a theoretical explanation was the rapid development of industry propelled by technological progress such as the invention of the steam engine and the power loom. The new technological dynamic was accompanied by a broad sectoral shift from agriculture to industry, structural changes in the areas of employment and consumer demand, and far-reaching institutional changes. The classical model was directed towards the grand question of whether the rapid growth of the industrial economy could eventually solve the problem of subsistence, or whether the new industrial regime represented merely another chapter in a "dismal science". Robert Malthus and David Ricardo developed the pessimistic doctrine of classical economics; Smith, in turn, was more optimistic, pointing in his writings to the advantages of the division of labor and specialization. When we look back from our position in the 21 century at the past two hundred years, we can see that Smith's st optimistic view is in accord with the actual development of the industrial countries. Analyzing the secular course of economic history, John Stuart Mill took up the question of the long-run "Stationary State" and introduced thereupon the distinction between economically "advanced" and "backward" countries. It is remarkable that all the classical economists, including Malthus, Ricardo, and later Karl Marx, were ultimately optimistic about the future secular course of mankind. Modern evolutionary economics has taken