Evolution and Economic Complexity

Evolution and Economic Complexity

Edited by J. Stanley Metcalfe and John Foster

Dedicated to the goal of furthering evolutionary economic analysis, this book provides a coherent scientific approach to deal with the real world of continual change in the economic system. Expansive in its scope, this book ranges from abstract discussions of ontology, analysis and theory to more practical discussions on how we can operationalize notions such as ‘capabilities’ from what we understand as ‘knowledge’. Simulation techniques and empirical case studies are also used.

Chapter 1: Evolutionary Foundations of Economics

Kurt Dopfer and Jason Potts

Subjects: economics and finance, evolutionary economics


Kurt Dopfer and Jason Potts ON ECONOMICS, COMPLEXITY AND EVOLUTION All ordered systems resemble one another, but each complex system is complex in its own way. The economy is a complex system, and so we might ask what, then, are the specific properties that make it complex? We say this: the complexity of the economic system is due to its modularity, openness and hierarchic depth. The economic system is modular in the sense of being made up of a large number of functionally specific parts. It is open in the sense that these parts interact with degrees of freedom. And it is deep in the sense that each module is itself a complex system: every part is a whole and every whole is a part. The economic system is modular, open and deep, and because there are many ways for a system to be like this, complexity is inherently emergent. Each complex component of the economic system tends to be complex in its own way. Yet there are overarching insights, and models of economic evolution nowadays incorporate many of these aspects of complexity (see, for example, Arthur et al. 1997; Foster and Metcalfe 2001). These refinements and additions have brought many improvements in the range and quality of evolutionary economic analysis. The problem, however, is that complexity is not really something that just bolts-on to an extant analytical framework to add a ‘complexity perspective’ over and above a ‘mainstream perspective’. For example, it has become commonplace now...

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