Evolution-Based Approaches in Economics and Evolutionary Loss of Information

Abstract:

Evolutionary economics provides a self-organizing, stabilizing mechanism without relying on mechanic equilibria. However, there are substantial differences between the genetic evolutionary biology and the evolution of institutions, firms, routines, or strategies in economics. Most importantly, there is no genetic codification and no sexual reproduction in economic evolution, and the involved agents can interfere consciously and purposefully. This entails a general lack of fixation and a quick loss of information through a Muller’s ratchet-like mechanism. The present contribution discusses the analogy of evolution in biology and economics, and considers potential problems resulting in evolutionary models in economics.

Keywords:

• error catastrophe
• evolutionary economics
• evolutionary loss of information
• resilience

JEL Classification Codes:

• B25
• B52
• O33

Notes

¹ In contrast to other contemporary social scientists, Veblen did not call for Darwinian approaches in economics or social sciences (for an overview, see Hodgson 2001).

² Note that recent evidence points to a variety of other elements that play a role in genetic evolution, most importantly protein folding in histones around which DNA is arranged (for an overview, see Campos, Stafford and Reinberg 2014), as well as prions.

³ This relation follows a function of the order O(0<const.<1)^(1/n).

⁴ Note that a larger population size would mathematically work, but would not be feasible for a shrinking sector.

⁵ Some countries implemented regulations that prevented the use of some competition strategies, favoring large firms (e.g., retail price wars).

Additional information

Notes on contributors

Torsten Heinrich

Torsten Heinrich is a post-doctoral researcher at the Institute for Institutional and Innovation Economics (IINO) at the University of Bremen (Bremen, Germany). He is grateful to Claudius Gräbner, Ulrich Witt, and Heinrich Päs for their many helpful comments. The usual disclaimers apply.