Geography Reference
In-Depth Information
understand economic evolution from the approach of generalized Darwinism demands
understanding what the key concepts of variation, selection and continuity might rep-
resent in the economy, how those concepts are put into motion, or embedded within a
dynamic system of economic competition, and how they are inl uenced by other mecha-
nisms specii c to that system. As Vromen (2004) notes, the aim of this approach is not
to see whether economic evolution can i t the general schema of generalized Darwinism,
but, rather, to see whether analysis of economic dynamics using these principles provides
novel insight into the movement of the economy over time.
The fundamental aim of evolutionary economics is thus to understand the dynamic
processes that jointly inl uence the behavior of i rms and the market environment in
which they operate (Nelson and Winter, 1982). These processes can be considered evolu-
tionary in the sense that the capitalist economy consists of competing agents that dif er in
at least some characteristics (heterogeneity) that inl uence individual prospects for eco-
nomic growth (selection), and that change more or less slowly over time (heredity), both
shaping and being shaped by the environment within which future competition unfolds
(Hodgson, 1993, 2002; Metcalfe, 1998).
Within the capitalist mode of production, i rms dif er from one another across a
series of dimensions - product type, technology, organizational form, location and
the behavioral routines adopted to regulate processes of investment, labor manage-
ment, technological search, and so on. This heterogeneity is an inevitable byproduct
of competition and innovation within an economy where production is carried out by
private i rms motivated by proi t but limited by information asymmetries and uneven
capabilities (Alchian, 1950). Uncertain of the future, i rms control whatever they can as
best they can, seeking competitive advantage by increasing the ei ciency of production.
For most, however, ei ciency is unknown until they enter the market. In this competitive
environment i rms are compelled to innovate, to search for new products and develop
new markets, to experiment with new sources of inputs, new processes of production
and organizational routines, sure only in the knowledge that others are doing the same
(Schumpeter, 1942). Indeed, it is this constant imperative to innovate that sustains eco-
nomic variety and provides the energy that fuels evolutionary change.
The competitive process of market selection regulates the proi tability of individual
i rms, their prospects for growth, and their ability to generate new routines. Selection
thereby alters the environment within which future decisions are made: it pushes some
i rms out of the market, encourages others to enter, and reshul es the relative ei ciency
of competing agents. It is important to note that the process of selection does not neces-
sarily identify and reward more ei cient i rms. Rather, sales are distributed unevenly
across competitors in a market. On average, those i rms that produce a commodity
more ei ciently are better able to translate revenues into proi ts and thus, given a certain
propensity to invest, increase their relative size at the expense of i rms that are relatively
inei cient (Metcalfe, 1998). Some i rms deliberately attempt to alter the selection envi-
ronment in which they i nd themselves, perhaps by dif erentiating the commodity they
of er for sale and thus competing in a particular niche market. Regardless, they are still
hostage to the same uncertainty that pervades all unregulated markets. Notice that selec-
tion does not result in 'progressive evolution', that is, the survival of the i ttest, most
adaptive or most ei cient. Fitness or ei ciency is always context dependent and dei ned
relative to a locally given environment and not according to some global maximum.
