Evolutionary Economics - Present State of Discussion

Present State of Discussion

One of the major contributions to the emerging field of evolutionary economics has been the publication of 'An Evolutionary Theory of Economic Change' by Richard Nelson and Sidney G. Winter. These authors have focused mostly on the issue of changes in technology and routines, suggesting a framework for their analysis. If the change occurs constantly in the economy, then some kind of evolutionary process must be in act, and there has been a proposal that this process is Darwinian in nature. Then, mechanisms that provide selection, generate variation and establish self-replication, must be identified. The authors introduced the term 'steady change' to highlight the evolutionary aspect of economic processes and contrast it with the concept of 'steady state' popular in classical economics.

Milton Friedman proposed that markets act as major selection vehicles. As firms compete, unsuccessful rivals fail to capture an appropriate market share, go bankrupt and have to exit. The variety of competing firms is both in their products and practices, that are matched against markets. Both products and practices are determined by routines that firms use: standardized patterns of actions implemented constantly. By imitating these routines, firms propagate them and thus establish inheritance of successful practices. A general theory of this process has been proposed by Kurt Dopfer and Jason Potts as the micro meso macro framework.