Geography Reference
In-Depth Information
ronment, perhaps understood as a single region. The general delineation of this region
might be the result of technology, i xed over the short run by the costs of transport,
from political i at, or from development of an institutional fabric given local coherence
by shared history. Over this short run, economic growth and change in the economy
may be understood as a simple aggregate of changes in the characteristics of individual
business units. Over the longer run, organizational forms and institutional relationships
may shift, altering the structure of competition and generating more profound shifts in
the regional political economy. Formal analysis of population dynamics results from the
work of Fisher (1930) and his fundamental theorem of natural selection that states the
rate of increase of aggregate i tness in a population is dependent on the variance of i tness
across the units that comprise that population. In our context, we might restate Fisher's
theorem as aggregate regional economic performance depends on the variance in levels
of performance across the plants within the region. It is important to note that Fisher's
argument captures a simple distance-from-mean replicator dynamics, where, on average,
more (less) ei cient plants experience faster (slower) growth rates. Plant entry and exit
can be incorporated within this model of selection.
Fisher's theorem is important for understanding population thinking and the process
of selection. It leads to a consideration of the properties that are selected for within a
population of interest and it focuses attention on the strength of the process of selection.
However, Fisher's theorem alone of ers only a partial account of evolutionary dynam-
ics because it does not explain the generation of novelty. Within the economy, at least,
there is surely little question that competitive advantage and growth hinge on techno-
logical change, on processes of learning, imitation and innovation, the deliberate search
by economic agents to improve their performance (Andersen, 2004a, 2004b; Metcalfe,
1998; Price, 1970). Price extends Fisher's arguments to show how the ef ects of selection
and technological change can be integrated to account for shifts in aggregate perform-
ance across a population of competing economic units. Technological change here is
used broadly to represent any alteration in production technology, organizational form,
behavioral routines or related characteristics of plants that impact ei ciency.
Figure 2.1 illustrates these ideas, providing a stylized representation of the population
of business establishments (plants) that dei ne, in part, a region's economy. Here we
ignore the formation and history of institutional arrangements and other characteristics
that more fully specify the coalescence of forces and relations of production that com-
prise the political-economy of a region at some time. Figure 2.1 describes plants in terms
of their technology (by a vector of capital and labor input coei cients; see Essletzbichler
and Rigby, 2005a). Thus, the symbols contained within the ellipse at time
t
represent all
the production units in operation within the region at that time. The dif erent symbols
identify business establishments that vary in terms of size and whether or not they remain
in business from time
t
to time
t
+ 1. The location of the symbols i xes the particular
combination of capital and labor coei cients, the technology, used by each plant. Thus,
at time
t
, the solid circles represent plants of dif erent size that remain in business at times
t
and
t
+ 1. We label these plants as incumbents. The crosses represent plants that are in
business at time
t
, but exit the region's economy by time
t
+ 1. These plants are known
as exits. The aggregate technology of the region at time
t
is the output weighted average
of the techniques of all plants operating in that time. Similarly, at time
t
+ 1, the aggre-
gate technology of the region is the output weighted average of plant technologies in use
