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Economics, Evolution and the State

Economics, Evolution and the State

The Governance of Complexity

Edited by Kurt Dopfer

This book focuses on the emerging field of evolutionary economic policy, highlighting the interface between the state, markets, and the evolutionary complexity of modern economies. The contributors explore the possibilities and limitations of governance, and provide a unique platform for the advancement of modern evolutionary economic theory.

Chapter 7: The Concept of Space in Trade – Some Evolutionary Basics

Carsten Herrmann-Pillath

Subjects: economics and finance, evolutionary economics


Carsten Herrmann-Pillath1 1. THE CHALLENGE: EXPLAINING THE SPATIAL DIRECTEDNESS OF TRADE The theory of international trade is one of the most developed contemporary applications of neoclassical equilibrium theory. Its political impact is tremendous, for it provides the intellectual foundation of the free-trade doctrine shaping the so-called ‘neoliberal’ approach to globalisation. Its academic rank and file obeys a tough intellectual discipline and receives a demanding, high-quality education.2 The high scholarly appreciation refers to the elegance and coherence of the formal approach as well as to the tremendous efforts in empirical testing and application. The general significance of this strand of research is related to its very strong normative claims and, in particular, to the fact that the basic premise of trade theory, the theory of comparative advantage, is the most cogent demonstration of why markets are beneficial to all participants. So far, the evolutionary economics of international trade is not a major concern. There are two salient topics, namely the impact of technology on trade (the seminal study is Dosi et al. 1990) and the role of corporate strategies and industrial policies in global competition (for example, see the volume edited by de la Mothe and Paquet 1996). However, there is no systematic attempt at deconstructing the neoclassical approach. Of course, one may hope that both approaches can co-exist, however, as they have fundamentally conflicting foundations, I think that this challenge should not be avoided. One obstacle to a reasonable debate is the fact that the debate...

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