The Concept of Equilibrium in Different Economic Traditions

The Concept of Equilibrium in Different Economic Traditions

An Historical Investigation

Bert Tieben

This book deals with one of the most puzzling concepts in economic science, that of economic equilibrium. In modern economics, equilibrium is considered a key assumption, but its role is contested by economists both from within the mainstream and from rival schools of thought.

Chapter 15: Evolutionary Economics

Bert Tieben

Subjects: economics and finance, austrian economics, history of economic thought, methodology of economics, post-keynesian economics


INTRODUCTION Like the Post Keynesian and Austrian schools, the broad movement known as evolutionary economics is highly critical of neoclassical economics. Nelson and Winter (1982), one of the classic works in this field, introduce their subject by noting the growing chorus of dissenters in contemporary theory. Hodgson (1993) motivates his efforts to ground economics on evolutionary principles by pointing to the crisis and chaos in economics. Invariably, general equilibrium theory is the main bone of contention. Hodgson says that GE theory has now reached a serious impasse. Langlois (1986) grounds the rise of rise of new institutional economics on a similar discontent with neoclassical equilibrium theories. Nelson and Winter list the following shortcomings of neoclassical equilibrium theory: it is unable to accommodate uncertainty or bounded rationality; it can cannot account for the presence of large corporations or institutional complexity, and it fails to give a credible explanation of actual adjustment processes. Evidently, in the face of such shortcomings a new kind of theory is needed, one that is able to handle all these things. This alternative is evolutionary economics. 1 The theoretical developments summarized under this heading are versatile and differ in their degree of criticism on neoclassical (general) equilibrium theory. 2 Nonetheless, there are a number of common themes which allow us to investigate them as a more or less unified approach. The first of these themes is realism (Vromen 1995). Evolutionary theorists believe that the formal way of theorizing, which is the trademark of general equilibrium analysis, has...

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