Publications

"This book .. aims at providing a coherent conceptual basis for the so-called evolutionary economics as an alternative to the neoclassical orthodoxy. To justify his focus on a new paradigm, the author sharply attacks neoclassical economics for its failure to address two major features of economic life: that many economic decisions by whatever agents are taken in the face of blatant uncertainty - not just risk - and that innovations in the broadest sense of the term - not just product and process innovations by firms - play a pervasive role as driving forces of economic development. Neoclassical economics typically accounts for these phenomena by simply squeezing them into the scope of static optimization over a set of (at best probabilistic) alternatives. In the author's view, such attempts are doomed to failure since the assumptions of the underlying mechanistic model miss fundamental aspects of human nature and behavior. ..... No doubt, this book provides quite a few insights into branches of science which economists usually ignore. In particular, it succeeds in bridging the gap between cognitive psychology and economics and thus helps to give the reader a more thorough understanding as to why, from a psychologist's standpoint, human behavior can hardly be narrowly described as the outcome of constrained optimization of whatever kind..."

"The FORTRAN program package SMS, Stochastic market Simulation, is intended for inquiring into

• the rather complicated dynamics of learning and adapting behavior in a complex imperfectly known stochastic market environment,
• the price- and quantity-processes in a monopoly market, resulting from alternative patterns of monopolist's behavior,
• the interfering effects which simultaneous, interacting learning and adapting behavior may have in monopolistic competition markets, where consumers search for acceptable offers.

Because of the complexity of the problems there seems to be no satisfactory way of exploring them analytically. This is not unusual in economics. Straight forward application of methods like experimental programming and Monte Carlo simulation, which we set out and document in detail here, however, seems to be rare. In our view this should be changed to broaden the understanding of the complex intertwining of systematic and random factors driving economic processes in a non-stationary environment. Therefore our purpose is not only to offer a program package for particular research tasks but also to demonstrate how a large simulation system can be constructed, handled, and integrated into microeconomic theory."

Like most collections of essays, this package is of uneven quality and often divergent focus. However, the average quality of papers in this collection is quite good, and some are outstanding. Ulrich Witt, one of the leading European exponents of evolutionary approaches to economics, has done a good job bringing together some interesting authors, most of whom are Germans little known in English-speaking circles. They and this collection deserve a wide audience.
   Witt's own introductory essay is well executed. He commits the obligatory editor's sin of portraying the collection as more focused and uniform in its themes and intentions than it really is, but the introduction nevertheless provides a nice overview not only of the volume but also of evolutionary themes in economics more generally. The book that follows is divided into three parts: formal theory; sociology and economic growth; and conceptual problems and policy implications.
   The "formal theory" section is a hodge-podge. The fist paper, by Werner Güth and Menahem Yaari, is a very nice example of the game-theoretic literature on the evolution of social institutions. The authors present a simple model that shows why human culture might evolve a preference for reciprocal behavior. Peter Weise follows with a chapter that attempts to tap into the sociological literature. In particular, the author wants to portray behavior as governed by a field of forces. Individual actions can be explained as attempts to minimize tension given such a field. (I wonder what Phil Mirowski would think of this?) Hans-Paul Schwefel, a computer scientist, offers a chapter that takes us in yet another direction. It is essentially a run-through of various quasi-evolutionary optimization or learning techniques, and it might be of interest to someone contemplating formal evolutionary modeling - so long as such a reader is willing and able to wade through some dense-packed prose.
   The middle section - on evolution and economic growth - is probably the best of the three, even though, to my taste, it bats only .667. The strike out is a paper by Joseph A. Weissmahr on "The Factors of Production of Evolutionary Economics." The chapter starts off as a critique of the classical factors of production, and makes some valid observations along the way. In the end, however, the author fails to see that the argument is valid against any approach that thinks in terms of aggregated and homogenized "factors" instead of looking in a disaggregated way at the evolution of economic behavior. Thus Weissmahr feels compelled to offer a "new" set of ultimate factors: knowledge, time, and energy flows. These are clearly important; and time and knowledge in particular are critical to evolution - too critical in fact to be homogenized into "factors." What is most odd about this paper is that it is not in the end evolutionary at all but physiocratic.
   The next chapter - by Günter Hesse - deals with some of the same themes (including solar energy!) in a much more sophisticated way. The thrust of the paper is to explain the evolution of industrial society in northern countries by the structure of the survival problem they faced (as against regions with warmer climates). There are still issues to be resolved, I think, but the hypothesis is fascinating. My main complaint is that the chapter paints itself as more sui generis than is warranted. E.L. Jones has talked about many of these same issues in the context of early economic growth, for example, and there is certainly a literature about the agricultural work-cycle and industrialization iu the context of the enclosure movement.
   The third chapter in this section, by Viktor Vanberg, is also first rate, as his work usually is. (Vanberg is perhaps the best known of these authors in English, since he now works in the United States.) The paper takes some very complex philosophy and makes it comprehensible. I especially like Vanberg's ability to make clever distinctions and break ideas into instructive categories. Like Hesse, he is interested in the sources of economic growth. Unlike Hesse, however, he stresses institutional structures rather than exogenous constraints, in a manner broadly consistent with the work of Douglass North. But the two chapters can be seen as complementary, in the sense that Hesse's argument applies to early societies in which resource constraints dominated cultural factors, whereas Vanberg's argument applies to later phases of development.
   The final section is a catch all. The chapter called "Information, Transaction, and Catallaxy," by Manfred Streit and Gerhard Wegner, is extremely interesting and makes a number of important points, even if the reader does not come away with a clear central message. The last chapter, by Alexander Gerybadze, is an attempt to classify industrial policies using some evolutionary ideas. Gerybadze singles out problems of institutional coordination as perhaps the most important role governments can play. Readers of this journal will likely fault him for too little attention to the rent-seeking possibilities of government action. Also, in stressing the role of governments in setting standards of coordination in a path-dependent world of "lock in" and "increasing returns," Gerybadze is following a trend in the justification of government intervention to which readers of this journal ought to be attentive. The touchstone for the presumption of government intervention was once simply public goods, externalities, or "natural monopoly." As those arguments became threadbare, attention shifted to "lemons models" and other more sophisticated stories. Nowadays, path-dependency arguments are beginning to gain preeminence. For the most part, as the late F.A. Hayek always emphasized, the normative implications of evolutionary thinking run to diversity, openness, and parallel paths rather than centralized administration. But the emphasis, in the work of Paul David and others, on path-dependent lock-in represents the other, and more interventionist, side of evolutionary thinking.