Survival of the Greenest
New Horizons in Institutional and Evolutionary Economics series
Chapter 2: Evolutionary Economics
EVOLUTIONARY THINKING Evolution is nowadays widely regarded as both a general concept and a set of concrete mechanisms to comprehend structural change processes that aﬀect human technologies, organizations and institutions (e.g. Ayres, 1994; Dennett, 1995). The application of evolutionary thinking to economics has made signiﬁcant headway during the past 20 years. This is partly the result of dissatisfaction with the way technological development is presented in the neoclassical economic model of economic growth. Technology was originally viewed as an exogenous variable that develops outside the economic process. Later it came to be viewed as an endogenous variable that could be ﬁtted rather easily into the framework of economic equilibrium analysis. More recent insights into the process of innovation, however, undermine this latter assumption. Technological development is now viewed as the outcome of a continuous interaction between generation (innovation) and selection of diversity in technologies and organizational structures. When we take this view as a starting point, the evolutionary approach provides a credible alternative to traditional theories of economic and technological change. The rational behaviour of individual persons and groups, which is assumed in traditional economic theory, is replaced in the evolutionary approach by bounded rationality, which can take the form of habits, routines, myopia and imitation (Nelson and Winter, 1982; Robson, 2001). The following elements and processes play key and complementary roles within evolutionary economics: ● ● ● ● ● Diversity (variation): populations of strategies, products, technologies and organizational structures. Selection: processes that reduce existing diversity. Innovation: processes that create more (increase) diversity....
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