Sunday, July 08, 2012

Economics as Coevolution Across Design Spaces

In The Origin of Wealth, Eric Beinhocker suggests that
Economic evolution is not the result of evolution in a single design space, but rather, as I will propose, the result of coevolution across three design spaces. In chapter 1, I briefly introduced two terms from Richard Nelson of Columbia University: Physical and Social Technologies. Physical Technologies are what we usually think of when we think of the word technology. Physical Technologies are designs and processes for transforming matter, energy, and information in ways that are useful for human purposes, for example, turning sand into glass or into silicon chips. Social Technologies are equally important, but often less at the forefront of our minds. They are the designs, processes, and rules that humans use to organize themselves. Villages, armies, matrix organizations, paper money, the rule of law, and just-in-time inventory management are all examples of social technologies. Business Plans play the critical role of melding Physical and Social Technologies under a single strategy, and then operationally expressing the resulting designs in the economic world. We need to think of Business Plans, Physical Technologies, and Social Technologies as three distinct design spaces because each has its own unique fitness functions at work. Business Plans tend to be selected for economic reasons, but Physical and Social Technologies may evolve for other purposes. (238)
Yet mainstream economics does not seem to consider any of these to be relevant to understanding the economy. Technological changes are considered to be "external shocks," even though Schumpeter almost 100 years ago pointed out the centrality of technological evolution to understanding the economy. I am guessing Business Plans are not being studied in economics departments, either -- if anyplace, they are studied in MBA programs. And Social Technologies? With the exception of the subcategory of money, are there any economists outside of the Austrian school interested in this? I am constantly amazed at how little of the economy mainstream economists actually study. However, hings are moving in the right direction, with behavioral economics, game theory, institutional economics, evolutionary economics, the integration CAS theory and agent-based modeling, and the rise of Austrian economics. With the complexity economics paradigm shift, economics as a whole, rather than just marginal pockets, might become a real science yet.
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